Final negotiations on, Walmart tries to acquire Flipkart

On Wednesday, Indian broadcaster CNBC-TV18 reported that Amazon had offered Flipkart a breakup fee of $2 billion to convince it to discuss an offer which analysts say would bring with it substantial antitrust challenges, as Flipkart and Amazon dominate the online shopping space in Asia's third-largest economy. While details are sketchy, it appears that the Amazon bid values Flipkart at close to $20 billion - 66 per cent higher than the valuation in August a year ago when the Bangalore-based firm raised $1.2 billion from a technology fund backed by Japan's SoftBank group.

Interestingly, Lore and the co-founders of Flipkart - Sachin Bansal and Binny Bansal - have all worked for Amazon in the past.

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. Flipkart is Amazon's primary competitor in the country.

Amazon's offer is likely to be on par with Walmart's bid for the Indian company.

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As Walmart-Flipkart deal enters final stages, it seems like Amazon is not backing down from the deal either.

Flipkart has also been negotiating a deal with Walmart, the $500-billion multinational retail chain which is ranked as the world's largest company by revenue, and has been looking to establish a footprint in India.

For Amazon, throwing its hat in the ring could be as much about derailing Walmart's efforts as it would be about defending its 27 percent market share in India, consultants and investors said. The Walmart-Flipkart deal would be Form 1 and an Amazon-Flipkart deal Form 2, said legal experts. After Son's bet on Snapdeal not turning out as planned, Soft-Bank ploughed $2.5 billion into India's largest e-tailer Flipkart just past year. However, an Amazon takeover would raise concerns over anti-competitiveness and monopolistic practices in the e-commerce industry, as the combined entity would no longer be concerned with competing against each other and would control nearly the entirety of the e-commerce market.

Investors expect faster returns from Walmart's investments compared to Amazon, said Yarbrough, a move that limits the brick-and-mortar retailer's ability to spend big on acquisitions in growth markets. The Amazon bid, the person said, is pegged at $22-23 billion.

(Copyright © 2015. All Rights Reserved.)
 
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