The board of Indian marketplace Snapdeal is learnt to have accepted the up to $950 million revised offer for buyout from its bigger rival Flipkart, moving one step closer towards the merger of the two e-commerce giants. The board of Jasper Infotech, which runs Snapdeal, approved Flipkart's bid of $900 million-$950 million last week, Reuters quoted sources familiar with the matter as saying. The deal will now require the approval of Snapdeal shareholders, they added.
The deal is considered crucial in the high stakes battle for supremacy in India’s fledgling e-commerce sector which, according to a 2016 report by EY, has grown at a compound annual growth rate (CAGR) of over 50 per cent in the last five years in India. The pace of growth is expected to continue, with e-commerce sales topping $35 billion by 2020, it said. With Amazon breathing down Flipkart’s neck with pledged investments of $2 billion in India, the deal becomes even more crucial for the homegrown etailer.
However, Flipkart’s plans are yet to clear the important hurdle of getting Snapdeal shareholders on board with the deal. The shareholders include, among others, PremjiInvest, the investment arm of billionaire Azim Premji who had ticked off the Snapdeal board over differential payments in an attempt to win over its larger investors for a fairly lower valuation.
Under the proposed terms, early investors, like Kalaari Capital and Nexus Venture Partners, would receive $60 million in addition to their new equity in Flipkart, while founders, Kunal Bahl and Rohit Bansal, would get a combined $30 million.
The board also considered a $700 million share-swap offer by listed e-commerce firm Infibeam but rejected it as too low, Reuters cited a source as saying. Separately, Indian private-sector lender Axis Bank is the frontrunner to acquire Snapdeal's digital payments unit FreeCharge for $60 million, the sources said.
Japan's conglomerate SoftBank, Snapdeal's biggest investor, is keen to consummate the deal and take an equity stake in Flipkart to profit from India's booming online retail market.
Latest Business News
