BENGALURU | NEW DELHI: US retail giant Walmart Inc will pick up a 77% stake in India’s largest online retailer Flipkart for $16 billion, successfully concluding more than 20 months of talks, in what will be the country’s largest acquisition and the world’s biggest purchase of an ecommerce company. It will include $2 billion of fresh investment as Walmart looks to take on rival Amazon’s global expansion, pegging the value of Flipkart at $22 billion.
The transaction will result in the largest exit for private equity and venture capital investors in India — they’re expected to collectively make about $14 billion by selling shares to Walmart. The transaction puts it ahead of the $14.6-billion Bharti-Indus Towers merger and the $12.9-billion Essar Oil-Rosneft transaction. Only the Vodafone-Idea merger was valued higher at $23 billion. Flipkart cofounder Sachin Bansalexits while the other cofounder Binny Bansal remains invested.
The early US market response didn’t seem too positive with Walmart dropping 4% as it lost $10 billion in market capitalisation to $242 billion. Amazon was up marginally by 0.3%, putting its market capitalisation at $779 billion. Walmart plans to use Flipkart’s expertise to expand globally and assured employees that its startup ethos will be nurtured and strengthened. “We hope we learn from you how to build an ecosystem, more about innovation and payments — we will help with sourcing, supply chain expertise,” Walmart chief executive Doug McMillon told Flipkart employees.Flipkart Brand to Remain Distinct
“It is our intention to just empower you and let you run — speed matters, decisiveness matters,” Walmart CEO Doug McMillon told Flipkart employees in a town hall meeting.
The Flipkart brand will remain distinct from that of Walmart, the companies said in a press release. Discussions between the two sides began in September 2016 with Walmart initially looking to pick up a minority stake. The nature of the talks shifted toward acquisition earlier this year, a direction that was championed by Greg Penner, chairman of the Walmart board and grandson-inlaw of founder Sam Walton, said people with knowledge of the matter.
ET was the first to report on all the key twists in the Walmart-Flipkart saga from the overtures in September 2016 and the pivot toward seeking a majority stake in January 2018.
Flipkart and Walmart said they are in discussions to rope in other investors, without specifying names. Google parent Alphabet is in talks to invest $1-2 billion in the company, ET had reported on April 27.
The remaining 23% stake in Flipkart will be held by cofounder and group chief executive officer Binny Bansal, Chinese Internet conglomerate Tencent, investment firm Tiger Global and software firm Microsoft Corp.
“This investment is of immense importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India,” Binny Bansal said in the press release.
WALMART VS AMAZON
The deal will pit Walmart and Amazon against each other in the Indian market, which will help boost the share of online in overall retail, experts said. “This allows Walmart to jump into a high-growth market, and results in two global players focusing on the growth of the Indian ecommerce market,” said Prasanto Roy, vice-president of Nasscom’s Internet Council. “The ecommerce fight ahead should be less about market share than about growing the market manifo .. Readmore…….