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By 04 May, 2018
Walmart inching closer to Flipkart deal; Accel eyes bumper returns
Photo Credit: Reuters

Flipkart, India's largest e-commerce company, has decided to sell a majority stake to US retail giant Walmart and a deal will be finalised within 10 days, a person familiar with the development told VCCircle.

The above-mentioned person also said that Bengaluru-based Flipkart is unlikely to entertain an offer from its nearest rival Amazon.

Walmart has made an offer to buy 60% stake in Flipkart in a deal that will value the homegrown e-tailer at $17-18 billion, the person said, adding that the transaction will largely take place through a secondary sale of shares.

"There is only very little scope for primary transactions as of now and hence there is no pre-money and post-money valuation for this deal," the person said. "Most of the primary infusion will happen after the deal is consummated as an investment into the Indian subsidiary."

Separate reports suggest that Google's parent Alphabet is looking at a 15% stake in Flipkart as part of the deal with Walmart.

Earlier in the week, Flipkart's nearest rival Amazon was said to have made a formal offer to buy 60% stake in the homegrown e-tailer with a break-up fee of around $2 billion. However, that offer would likely meet with valuation and regulatory obstacles.

Amazon is already engaged in a tussle with Walmart and Google on foreign shores and in the US in particular.

Exits for investors

Flipkart's existing investors such as venture capital firm Accel Partners, Japanese investment giant SoftBank, New York-based investment firm Tiger Global and South African media conglomerate Naspers are likely to sell their stake as part of the deal.

The transaction would also rank among the top 10 global exits for Accel, which was the first institutional investor in Flipkart and also backed the firm in subsequent rounds, said the above-mentioned person.

Accel India operates under US-based Accel's banner but is managed and run independently.

Accel Partners has had some stellar exits globally in recent years, particularly in 2015.

Atlassian, a tech company in the US, went public with a $1.1 billion initial public offerings.

According to CB Insights, Accel Partners had invested in a $60 million secondary market transaction in 2010, when Atlassian was valued at $400 million.

Another Accel portfolio company, US-based ed-tech firm Lynda.com, was acquired by social networking platform LinkedIn at a valuation of $1.5 billion.

In India, Accel had a good exit, when cab-hailing app TaxiForSure was acquired by rival Ola for $200 million in a cash and stock deal. That was the second largest deal in the consumer internet space in India, behind Flipkart’s acquisition of fashion e-tailer Myntra in 2014.

A deal with Walmart would also mark the first full exit for SoftBank's $100 billion Vision Fund, which is backed Saudi Arabia's PID public fund, Apple, Qualcomm, among others.

SoftBank had pumped in $2.5 billion into Flipkart in August last year. Most of Flipkart's minority shareholders had shed a part of their stake in that deal, with SoftBank accumulating more than 20% stake in the process.

In all, Flipkart has received more than $7 billion in investment over the years.

Flipkart and Accel Partners did not respond to email queries till the time of publishing this report, while Walmart did not offer any official comment. A SoftBank spokesperson said the firm would not comment on speculation.

Share buyback

Even as the deal moves closer to fruition, Flipkart has bought back $350 million worth of shares from its investors as it seeks to convert its Singapore-incorporated company to a private limited firm - a move that could pave the way for a new strategic investor to come aboard.

Flipkart Ltd purchased shares for $350.5 million from some of its investors including Shekhar Kirani of Accel, SoftBank (9984.T) executive Deep Nishar’s family trust, IDG Ventures and a host of pension funds, according to May 3 regulatory filings from Singapore’s Accounting and Corporate Regulatory Authority, sourced by business intelligence platform paper.vc.

Meanwhile, separate reports suggest that should the deal with Walmart go through, Flipkart co-founder Sachin Bansal will leave the company while fellow co-founder Binny Bansal and chief executive officer Kalyan Krishnamurthy will stay on and run the firm along with Walmart's nominees.

Bansal and Japanese investor SoftBank are said to be in favour of joining hands with Amazon.

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