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Flipkart-Snapdeal merger hits speed bump as PremjiInvest raises objections

23 June, 2017

The much-anticipated merger between Indian e-commerce companies Flipkart and Snapdeal looks to be delayed further as one of its smaller investors, PremjiInvest, has once again sought clarity on the rights of minority shareholders, media reports said.

In a letter sent to Snapdeal, PremjiInvest, the family investment arm of Wipro Ltd chairman Azim Premji, demanded clarity—for the second time—on how the rights of minority shareholders will be protected in the proposed deal, The Economic Times reported, citing people it didn’t name.

The report said PremjiInvest is working on reaching a consensus with other minor investors in Snapdeal such as Singapore state investment firm Temasek and asset management company BlackRock to oppose any special payments to certain shareholders, including co-founders Kunal Bahl and Rohit Bansal and early backers Kalaari Capital and Nexus Venture. Over a dozen small investors are coming together to oppose any such move, the report said.

Separate email queries sent to Snapdeal and PremjiInvest haven’t elicited any response.

According to the report, the special payment amounts to $150 million, which is likely to be borne by the rest of the shareholders. However, this can happen only if all stakeholders agree to the terms.

Meanwhile, Bloomberg has reported that PremjiInvest is objecting a proposed special payment of $90 million. This comprises $60 million to Kalaari Capital and Nexus and $30 million to Snapdeal founders.

However, the investment firm has no objections to the proposed special payment package of $30 million for Snapdeal employees.

Snapdeal’s other investors include China’s Alibaba, Tata Sons chairman emeritus Ratan Tata, Canada’s Ontario Teachers’ Pension Plan and Taiwanese electronics maker Foxconn. These smaller group of investors own about 40% of the firm, but do not have board representation.

Last week, Nikkei Asian Review reported that Masayoshi Son-led Japanese Internet conglomerate SoftBank, which is orchestrating the merger, had reportedly reached a broad agreement with stakeholders on the deal. SoftBank, which is looking to own about 20% of the combined entity, will put in more money via its massive joint investment fund.

In April, it was reported that SoftBank, the largest investor in Snapdeal, was to put $500 million into Flipkart. However, it was contingent on the overall terms of the deal.

VCCircle was the first to report in August last year that Snapdeal was considering a possible merger with Flipkart that could realign the contours of the country’s e-commerce industry.

The deal talks—which ran into a stalemate due to disagreements over valuation between Nexus and Kalaari on one side and SoftBank on the other—picked up pace last month after SoftBank managed to convince Snapdeal’s early investors. However, the fate of Snapdeal’s associated entities, including in-house logistics arm Vulcan Express, payment wallet FreeCharge and e-commerce solutions wing Unicommerce, is still unclear.

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Flipkart-Snapdeal merger hits speed bump as PremjiInvest raises objections

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