Amazon Makes Formal Offer for 60% of Flipkart

Isaac Cain
May 5, 2018

On top of its offer to buy a 60% stake in Flipkart, Amazon is also reportedly offering a "breakup fee" of $2 billion for Flipkart to walk away from Walmart's offer. The Walmart-Flipkart deal would be Form 1 and an Amazon-Flipkart deal Form 2, said legal experts.

Citing sources, the report said the offer bring Amazon's offer on par with Walmart Inc's bid for the e-commerce company. Walmart may also buy the stake of the its founders, Sachin Bansal and Binny Bansal.

Walmart is said to be finalising a deal to acquire majority stake Flipkart.

Tiger Global which controls around 20 per cent of Flipkart, Naspers which controls around 14 per cent and other smaller investors are all expected to gain full exits from the company post the deal.

It has been suggested that Amazon was looking to make an offer itself in order to prevent the entry of Walmart into the Indian e-commerce market, but this appears to be the first firm report that the American e-commerce major has actually done so.

Flipkart and SoftBank declined to comment on the report.

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Walmart also gets to grab a foothold in India's booming e-commerce industry. Amazon entered the Indian market around 2012 and has 31 percent of the online retail market, according to Forrester, eight percentage points behind its homegrown rival.

Winning the India market has become pivotal for both Amazon and Walmart, the two have not been able to make significant headway in China.

Also, the management team will not change with a Walmart deal, but it may have to go with Amazon, sources told ET. While details are sketchy, it appears that the Amazon bid values Flipkart at close to $20 billion - 66 per cent higher than the valuation in August previous year when the Bangalore-based firm raised $1.2 billion from a technology fund backed by Japan's SoftBank group.

This news is coming when Walmart is investing a big amount in Flipkart to Buy 52% -86% share in Flipkart.

At present, Flipkart's two biggest investors are SoftBank, which holds about 23 per cent stake, while the US-based investment fund Tiger Global retains about 20 per cent of the online retail company.

Walmart's shares were 0.84 percent down at $86.67 during afternoon USA trading.

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