Amazon offers $2 billion breakup fee in Flipkart-Walmart deal talks

Flipkart-Amazon-Walmart

US e-tailer Amazon showing serious intent to acquire home-grown Flipkart has upped the ante and offered breakup fee of around $2 billion.

“Amazon is keen on the deal and the breakup fee can be anything north of $1 billion in a deal where Flipkart is valued at $18-20 billion,” a Factor Daily report quoted a source close to the development.

The quantum of the fee has not been finalised, added the report.

Typically, the break up fee is paid to the other party by the party offering the fee, if the deal doesn’t close successfully or the side offering the fee backs out of talks. However, another source in the report added that the breakup fee is yet to be made to Flipkart.

Earlier, Amazon has held exploratory talks to buy Flipkart.

Amazon through the deal wants to hit two birds with a stone. It will first stop Walmart from entering India, where it has second dominant position after Flipkart. Second, it will have a good hold in growing Indian e-commerce market after losing China.

Meanwhile, Walmart has reportedly completed due diligence in the Bengaluru-based company. Flipkart and Walmart have been engaged in a possible deal for about past seven weeks.

Walmart is eyeing to grab a little over half of the Softbank-backed company. The retail major has offered a proposal with a shareholding agreement. If the deal gets through, Flipkart is likely to be valued about $20 billion.

The investment will give strong ground to Walmart in Indian e-commerce space which is slated to touch $100 billion mark by 2020. It will also spruce-up retail giant’s position against an old local rival – Amazon in India.

The retailer eyes investment in the range of $10-12 billion for about 51 per cent stake in the online marketplace. Flipkart’s backers including Tiger Global Management, Accel Partners, and Naspers, who will sell their entire shareholding in the company to Walmart. Till date, Flipkart has secured more than $6 billion.

At present, SoftBank owns 23.62 per cent stake in the company while Tiger Global holds 22.44 per cent of preference share capital. South Africa-based media and Internet conglomerate has about 14.57 per cent of preference share capital.

India e-commerce market is slated to cross $50 billion in 2018. Both Flipkart and Amazon have been in fierce battle against each other to grab the larger pie of it. To prove their leadership, both e-tailers have infused a huge sum of capital in recent times.

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