- Softbank is likely to invest $1.5 billion to purchase primary and secondary shares
- The deal could bring about one of the biggest consolidations in e-commerce market
- Flipkart is valued at $10 to 11 billion which is valued at $6.5 billion
Japanese business giant SoftBank is pushing for a possible merger between financially struggling Snapdeal and Flipkart. The deal could be a significant boost for Snapdeal, which is struggling in online marketplace which was forced to sack 600 employees.
If materialised, this deal could bring about one of the biggest consolidations in the domestic e-commerce market, which is facing a cash crunch. Softbank is likely to invest $1.5 billion by purchasing primary and secondary shares, and with this merger, the Japanese giant will get around 15% share in the Flipkart-Snapdeal combine.
Softbank owns over 30% shares in Snapdeal which is valued at $6.5 billion in 2016. The merger deal will include shares worth $1 billion of New York-based Tiger Global, the largest investor of Flipkart, along with fresh equity of Softbank. Tiger Global owns 30% shares in Flipkart and is expected to sell 10% of its stake.
Softbank has made three proposals for Snapdeal, to combine with Paytm, merge with Flipkart or to writedown Softbank's investment to zero. Softbank and Flipkart have agreed on the contours of the deal, and if the terms stay on track, the talks will culminate into a transaction by April, sources revealed.
Flipkart is valued at $10 to 11 billion and is expected to raise up to $2.5 billion if the deal goes through. Though Flipkart is yet to officially declare its fund raise, they have already gained fresh capital worth $700 million from Tencent Holdings Ltd and $200 million from Microsoft.
Even with such big names valuation of Flipkart declined from $15.5 billion in 2015 to $10 billion in 2016.
Meanwhile, Snapdeal has been facing a major crisis and has been forced to give out its office space. With the Softbank tie-up, Flipkart aims to gain a strong anchor investor to acquire a new footing in e-commerce market in the next three years.
Last Updated 31, Mar 2018, 6:44 PM IST