Struggling e-commerce platform Snapdeal on Monday said it had decided to continue its business as independent entity and was calling off talks pertaining to its acquisition by bigger rival Flipkart. "Snapdeal has been exploring strategic options over the last several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result," the official spokesperson said.
The board of Jasper Infotech, which runs Snapdeal, had in-principle agreed to Flipkart's revised bid of up to $950 million for a cash-cum-share swap deal but the approval of smaller shareholders had still not come through. Founders Kunal Bahl and Rohit Bansal were keen on an alternative option of running Snapdeal independently and have managed to hold their own against Softbank.
The failure to push the deal through represents a major setback for Softbank Group, the largest investor in Snapdeal, as the Japanese firm has been trying to forge a deal with the aim of securing a sizeable stake in Flipkart. SoftBank holds close to 35 per cent stake in Snapdeal. According to company sources, the talks ended on account of the complexity of the deal that came with multiple conditions, right from indemnity to a non-compete clause. These did not find favour with the founders of the Gurugram-based online marketplace, they added.
Founders Bahl and Bansal plan to run a stripped-down version of its online marketplace and this has the backing of the firm's early investors Kalaari Capital and Nexus Venture Partners, sources said. Snapdeal will be able to financially sustain itself with the sale of certain non-core assets, the firm said in its statement.
The company has already announced one such sale in which Axis Bank said last week it would acquire the company's digital payments unit FreeCharge for Rs 385 crore. The deal constitutes a distress sale as Snapdeal had bought FreeCharge in April 2015 for over Rs 2,500 crore. 400 million at current exchange rates. Standard Chartered's private equity arm is reported to be in talks to acquire Snapdeal's logistics arm Vulcan Express.
According to sources, the founders' bid to keep Snapdeal independent may lead to layoffs at the company, which currently employs about 1,200 people. SoftBank, on its part, said it respects Snapdeal's decision to pursue an independent strategy. "We look forward to the results of the Snapdeal 2.0 strategy, and to remaining invested in the vibrant Indian e-commerce space," SoftBank said in a statement.
"Supporting entrepreneurs and their vision and aspirations is at the heart of Masayoshi Son's and Soft-Bank's investment philosophy," the Japanese firm said. The deal was also contingent upon a nod from Snapdeal's high-profile minority investors, including Ratan Tata.