Walmart Acquires Majority Stake in Flipkart Valued at $16 Billion

The much-anticipated Walmart acquisition of Flipkart in India has finally come through.

After weeks of speculations, Softbank CEO Masayoshi Son confirmed Walmart’s entry into India’s highly competitive online retail sector.

(Photo: The Quint/Erum Gour)

US retail giant Walmart’s long-standing deal to acquire Flipkart finally came through on Tuesday, 8 May, Softbank CEO Masayoshi Son announced on Wednesday. BloombergQuint has been quoted saying that the deal worth $16 billion will fetch Walmart a 77 percent controlling stake in Flipkart. This has now been officially confirmed with Flipkart’s statement here.

Reuters says that the remainder of the business will be held by some of Flipkart's existing shareholders, including Flipkart co-founder Binny Bansal, China's Tencent Holdings Ltd, Tiger Global Management LLC and Microsoft Corp, as mentioned in the company statement on Wednesday.

The deal represents astounding returns for the e-shopping portal which has already exhausted nearly half of the $6.1 billion it previously raised from SoftBank, Tiger Global and a few other investors.

Many analysts believe that with Walmart’s entry into India’s online retail sector, Alibaba-backed Paytm Mall and Amazon.in (which is now taking the lead in India’s e-commerce space) will face some serious competition.

Earlier, Amazon was vying to buy Flipkart and even went to the extent of offering a “breakup fee” of up to $2 billion. A breakup fee is a penalty set during the process of takeover agreements which has to be paid if the buying party backs out of the deal.

Though, the highly speculated Amazon’s interest in buying Flipkart was never going to come through, according to market experts, especially with heavy competition compliance being a huge challenge.

Walmart, the nearly $500 billion American giant, has been unable to set up brick and mortar retail stores in India. With the Flipkart deal, its aspirations in the second most populous country in the world can finally come to fruition.

Softbank is the other big winner in this deal. However, Sachin Bansal may reportedly move out from the brand he started with Binny Bansal, who had met during their days in IIT Delhi. Flipkart begin its operation more than a decade ago.

According to a Bloomberg report, SoftBank’s 20 percent stake in India’s largest e-retailer is worth about $4 billion in the deal, as told by Son in an earning webcast. Son did not share any further details about the transaction.

India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of e-commerce in the market. Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.  

Doug McMillon, President and Chief Executive Officer, Walmart  

Analysts believe that the Walmart-Flipkart arrangement will bring happy days for buyers, however, they’re concerned for the wellbeing of the small vendors spread across the country.

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, Co-founder and CEO, Flipkart

What’s at stake for online giants like Walmart and Amazon in India.(Photo: The Quint/Canva)

The fact that Sachin Bansal hasn’t talked about this deal, suggests that the rumours of him exiting the brand carry weightage. Even though the deal has come through, it’ll take more than a couple of quarters for the effect of the acquisition to reflect in the Indian market.

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