US major ready to pay breakup fee of $2 bn
Mumbai : US online retail giant Amazon.com has made a formal offer to acquire a 60 per cent stake in India’s leading e-commerce marketplace Flipkart.
The US major also offered Flipkart a breakup fee of $2 billion, according to a report by CNBC, citing sources.
Amazon’s offer to acquire a majority stake in Flipkart comes at a time when rival Walmart is close to completing a $12 billion deal to pick up an equivalent amount of stake in the Indian firm. Talks between Walmart and Flipkart have been on for months now and the deal was expected to close soon.
Amazon’s bid is likely to be on par with Walmart’s bid for the Indian e-commerce company. Flipkart’s investors and founders are in favour of the deal with Walmart, with founder Sachin Bansal overseeing final negotiations with Walmart, the TV report said.
Amazon is also seeking a non-compete agreement with Flipkart’s founders.
Walmart has agreed to invest around $12 billion to pick up around 60 per cent stake in Flipkart, in a mix of primary and secondary deals. While the valuation of the primary component can be as high as $20 billion, the second component will be at a much lower valuation. A deal with Flipkart would step up the Walmart-Amazon battle for a bigger share of India’s e-commerce marketthat is estimated will be worth $200 billion in a decade.
Previous reports have stated that Flipkart’s founders and investors have been uncomfortable with selling their stake to Amazon given that the deal could face regulatory hurdles. Flipkart and Amazon combined would control a little over 80 per cent of India’s overall e-commerce market, which could raise red flags for the anti-competition regulators of the country.
Tug of war
Amazon’s bid is a counter to Walmart, which is in advanced talks to become the largest shareholder of Flipkart
Walmart was likely to reach a deal to buy a majority stake in Flipkart by June-end for $10-12 bn.
Amazon’s new bid was likely to be on a par with Walmart’s, but that Flipkart’s investors and founders continue to favour the deal with Walmart.
