Flipkart All Set To Acquire Snapdeal, Makes Informal Offer of $1B

Reports say it all, after a long haul of three months, with more than 15 meetings, and a payout of at least $210 million later, it’s finally clear that Softbank is merging its biggest Indian asset Snapdeal with leading eCommerce player, Flipkart. The deal valuing Snapdeal at around at $1 billion, a steep fall from its peak of $6.5 billion last year.

India’s most awaited startup deal is said to be almost closed as the largest online marketplace Flipkart has made an informal offer to buy struggling smaller rival Snapdeal for $1 billion in an all-stock deal. While Snapdeal's founders accepted the offer of $15 million each for the stake and Nexus Venture Partners would get $50-60 million for its stake in the company.

This means that not only SoftBank but many of Snapdeal investors will be incurring a hefty loss on their investment into the e-commerce firm. SoftBank on Wednesday (May 10th, 2017) wrote off over $1 billion (Rs 6,400 crore) from its Snapdeal investment.

Amid persistent differences between Snapdeal’s largest investor SoftBank Group and two other key shareholders, Kalaari Capital and Nexus Venture Partners, upon the various valuation numbers. The three investors now seem to have reached a kind of consensus over Snapdeal's valuation and the expected price of sale (of the business).

According to reliable media sources, Flipkart’s offer is a non-binding one and a formal term sheet will be signed over the next few days, with the due diligence process expected to commence by next week.

While the board of Delhi-based Jasper Infotech Pvt Ltd, which runs Snapdeal, has not reached any consensus on the exit payouts to Nexus and Kalaari, they have mutually given the go-ahead for the deal to be signed and taken through due diligence.

Last month, Flipkart offered $1 billion in stock to buy Snapdeal (excluding FreeCharge). Now, it is expected to make another offer once the differences at Snapdeal’s board are resolved. Snapdeal, which has raised nearly $2 billion in cash, hit a peak valuation of $6.5 billion in February 2016 when it received $50 million from investors.

Kalaari and Nexus are still feuding over their exit payouts from SoftBank, people involved in the talks said. SoftBank has proposed to hand out $60 million to Nexus and about $30 million to Kalaari.

Snapdeal founders Bahl and Bansal have been offered $15 million each, with an additional $30 million for the entire management team and employees at Snapdeal.

Separately, online payments firm Paytm is in talks to buy Snapdeal-owned payments firm FreeCharge in a fire sale. The company has offered to pay $40-$50 million for buying FreeCharge at a 50% discount at $150-200 million. Now, however, it looks like that selling price may have gone much lower as an ET report says that the deal is estimated between $45 million and $90 million and could be finalised by the end of the month.

Not just that, since there's a speculation that Paytm was looking to buy Freecharge, this latest development doesn't puts all rumours to rest. Besides Paytm, several other companies were in the race to acquire the company when Snapdeal put it on sales, including MobiKwik, PayPal, Flipkart, among others. MobiKwik was looking for a merger deal with Freecharge.

However, in an exclusive interview with BW Businessworld, Vijay Shekhar Sharma on May 11, 2017 commented diplomatically that Paytm is not actually a buyer firm, it makes only strategic decisions good for its future."

We will keep you updated for more. Stay tuned!