Finance

Amazon offers to buy 60 percent in Flipkart

Amazon offers to buy 60 percent in Flipkart

Mumbai: Amazon, the U.S. e-commerce giant, is believed to have made a formal offer to acquire a 60 per cent stake in Flipkart after weeks of speculation in the media that such an overture was imminent.

The Walmart global team may come to India soon to close the deal.

With the rival combination of Flipkart and Amazon looking increasingly unlikely, now the world's largest retailer, Walmart Inc., is believed to be in final negotiations to buy a majority stake in Flipkart Ltd.

The company, which is based in Bangalore, is Amazon's biggest competitor in India, where the ecommerce market is forecast to hit $200 billion a year within a decade. The e-Commerce giant also is offering a $2 billion breakup fee in recognition of the regulatory challenges the deal would face, and is seeking a non-compete agreement with the founders of Flipkart. However, an Amazon takeover would raise concerns over anti-competitiveness and monopolistic practices in the e-commerce industry, as the combined entity would no longer be concerned with competing against each other and would control nearly the entirety of the e-commerce market.

Presently, Walmart is planning to acquire majority stake in Flipkart and it has already offered to buy the shares of major stakeholders of the company, including that of SoftBank. Amazon should have made this offer much earlier without competing with Flipkart and not waited for Walmart to make a bid. Tiger Global, Naspers and other small investors would receive full exits from Flipkart with the Walmart deal, while Softbank would sell a large part of its 25% stake, but continue to hold a small stake in Flipkart even after the sale.

The source said on condition of anonymity that a deal could take at least a month to be signed. "So far, Flipkart investors are holding out to see what Amazon has to offer". "It will be very hard for them to win India back if they miss this opportunity". Amazon's due diligence process is only expected to start if Flipkart's board agrees on the offer.

Overall, sales from Walmart International, which runs about 6,300 stores globally, stood at $118 billion in the fiscal year ended 2018, down almost 14 percent from $136.5 billion in 2014.

In an interview with Reuters on Tuesday, McKenna said India was a "growth market", and downplayed analyst criticism that the company has been slow to move in the country.

In an interview with TOI just a few days ago, Son said, "We are involved in discussions with key shareholders and the management".

Walmart's shares ended 1.22 percent lower at $86.34 on Wednesday.