The board of struggling e-commerce major Snapdeal has agreed to accept bigger rival Flipkart's offer to take over the company in a cashcum-shares swap deal valued up to $950 million, according to reliable sources. The board of Jasper Infotech, which runs Snapdeal, approved Flipkart's bid of $900 million-$ 950 million last week, said sources in the know. They did not want to be named as the talks are bound by a confidentiality clause.
The deal will need approval from smaller shareholders of Snapdeal before it gets finalised, sources said. The deal is being driven by Softbank Group founder and CEO Masayoshi Son. It will enable the Japanese company, which is the biggest investor in Snapdeal, get a stake in Flipkart. The combined entity will be in a stronger position to take on US e-retail giant Amazon which has committed to investing $5 billion in India.
Compared to a valuation of about USD 6.5 billion in February 2016, the sale to Flipkart could see Snapdeal being valued at about USD 1 billion. Soft-Bank has already written off over USD 1 billion on valuation of its investment in Snapdeal. The acquisition of Snapdeal means one less rival for Flipkart, said Harminder Sahni the founder of Wazir Advisors, a boutique consultancy firm. "Flipkart may have a plan to run Snapdeal as a differently positioned business just like they run fashion portals Myntra and Jabong," he said.
Snapdeal and Flipkart did not respond to Mail Today's request for comments on the issue. According to sources, the Snapdeal board also considered a $700 million share-swap offer by listed e-commerce firm Infibeam but rejected it as it was too low. Freecharge Deal Axis Bank is reported to be the frontrunner to acquire Snapdeal's digital payments platform FreeCharge and has apparently bid $60 million for the asset.
Axis did not immediately respond to a request for comment. The sources said Snapdeal's founders Kunal Bahl and Rohit Bansal still have reservations about an acquisition by Flipkart however, and are mulling an alternative path. Bahl and Bansal want to use the money from the sale of Snapdeal's logistics arm Vulcan Express and FreeCharge to run a downsized marketplace, they said.
One of the sources said the two founders were hoping for the backing of some early stage investors in Snapdeal and hoped to take the proposal to Jasper's board.
Both sources said it was unlikely the board would approve this, however, as Snapdeal's largest shareholder Softbank is keen to conclude a deal with Flipkart. Softbank has invested around $900 million in Snapdeal and is a stakeholder in the company as well as digital payments platform Freecharge.
The Japanese company which has drastically written down the value of its investments in Snapdeal , is looking at a fire sale in exchange for equity in Flipkart, India's largest e-commerce firm.
Softbank is reportedly planning to invest around a $1.5 billion in Flipkart for significant stake in the company The deal between Snapdeal and Flipkart, if completed, would mark the biggest acquisition in the Indian e-commerce space.