Monday, May 28, 2018

Walmart pays about $15 billion for majority stake in Flipkart

The board of Flipkart On Line Services has approved an agreement that will see it sell about three quarters of the company to Walmart Inc. for approximately $15 billion according to people familiar with what is happening.

Flipkart Online Services
Flipkart Online Services Private Limited owns and operate an e-commerce website. It sells books, movies, music, games, televisions, digital cameras, mobile phones, computers, network components, software, peripherals, as well as kitchen and other home appliances. The company has headquarters in Bangalore India.
The terms of the agreement
Under the terms of the proposed deal, SoftBank Group will sell all of the 20 plus percent stake it holds in Flipkart through an investment fund at a valuation of approximately $20 billion for the whole company people who know about the situation said but wished to remain anonymous since it was a private agreement.
Alphabet, the parent of Google is likely to take part in the investment along with Walmart one person said. A close is expected within the next ten days but terms could still change and the deal was not certain the group said.
The deal would be a triumph over rival Amazon
Amazon has been trying to take control of Flipkart with a competing offer. The Flipkart board decided that a deal with Walmart is more likely to get regulatory approval. Amazon is already the number two e-commerce operator in India after Flipkart. Amazon would not likely get approval for a takeover of Flipkart.
Deal would give Walmart a leading position in Indian e-commerce
If completed, the agreement will provide Bentonville, Arkansas-based Walmart with the leading position in the Indian market of 1.3 billion people. It would also give a chance to build its online reputation. Walmart has struggled in online competition against Amazon as more consumers spend on the Internet. India has large potential. In China foreign retailers are not making much progress against China's Alibaba Group.
Arvind Sighhai, chair of the New Delhi-based Technopak Advisors said: “Flipkart is key to a global e-commerce strategy. Walmart clearly doesn’t want to be left behind in the race as India is a critical piece.”
Amazon aggressively expanding in India
Amazon has invested $5.5 billion in India. The local head Amit Agarwai has made progress by adapting the Amazon site to local conditions. CEO Jeff Bezos would like to succeed in India after his investment did not turn out well in China. Amazon has been gaining on Flipkart and it has tried to derail the deal with Walmart. Walmart can no doubt help Flipkart compete with Amazon. Walmart has been working to win over Flipcart for at least a year now.
As part of the Walmart deal, existing shareholders such as Tencent Holdings, South Africa's Naspers Ltd. and Microsoft will still retain small stakes people say.
Softbank
The SoftBank group is a Japanese company with headquarters in Tokyo. It owns operations in broadband, fixed-line telecommunications, e-commerce, Internet, technology services , finance, media and marketing, semi-conductor design and many other businesses. It has many subsidiaries.
The SoftBank group was ranked 38th largest public company in the Forbes Global 2000 list. It is the fourth largest publicly-traded company in Japan.
SoftBank will turn a tidy profit on the stake it bought in Flipkart just last year. Through its Vision Fund, it invested $2.5 billion. However, at the Walmart deal's valuation it will now be worth more than $4 billion.

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