Flipkart likely to go with Walmart even as Amazon makes a last-ditch bid: report

The race to acquire the biggest chunk of India's e-commerce pie seems to be going in favour of world's largest brick-and-mortar retail giant. Walmart is said to be finalising a deal to acquire majority stake Flipkart. This comes amid reports that Flipkart's largest shareholder SoftBank may be pushing for a merger with Seattle-based Amazon.

According to a report in TOI, SoftBank has been willing to invest about $4 billion afresh into the Indian e-commerce leader if it pursued an alternate merger with arch-rival Amazon. The Japanese conglomerate is ready to deploy this sum to buy shares from smaller investors and help it maintain around 20 per cent stake in the combine with Amazon. Most Flipkart shareholders also prefer a cashout deal as against a share-swap with Amazon, it said.

On Wednesday, CNBC TV18 reported that the global e-commerce behemoth has made a formal offer to Flipkart to buy a 60 per cent stake. The report added that the deal offered by the Jeff Bezos-run company proposed to merge Flipkart entirely with its Indian arm and sought a non-compete agreement with Flipkart's founders for 1-2 years. While the financial contours of this new deal on the table are broadly expected to match the Walmart proposal, Amazon is reportedly also offering a breakup fee of $2 billion to underscore its interest. This fee, also called a termination fee, comes into effect if the deal falls through halfway into negotiations.

The regulatory hurdles, however, may put a stop to Amazon's acquisition plans. Any Flipkart-Amazon deal is likely to come under the scanner of the Competition Commission of India (CCI), given the dominant market share these two entities have grabbed in the e-commerce space - around 70 per cent collectively. So Flipkart's investors will likely think twice about any such offer.

Walmart's bid for Flipkart, which is also its biggest e-commerce bet anywhere globally, is likely to boost its online expansion in Asian markets. The Bentonville, Arkansas-based retail major is expected to pump in over $12 billion in Flipkart for a majority stake in the company and this investment is likely to value the Indian unicorn at $18-20 billion. Its entry could also significantly shake up things for Flipkart's board. The buzz is that the American company could bag four of the 10 seats on the board but the top management is not expected to change.

Last year, Japan's SoftBank bought a 20 per cent stake in the country's leading e-tailer for $2.5 billion through its $100 billion technology-focused Vision Fund. It was the biggest ever private investment in an Indian tech firm at the time.

Walmart had earlier completed its due diligence for the Flipkart deal. Both Walmart and India's homegrown e-commerce leader stand to gain much if this long-speculated deal goes through. To begin with, they get to pool resources to compete against a common enemy, Amazon, in online as well as offline retail channels. Walmart also gets to grab a foothold in India's booming e-commerce industry.

Meanwhile, Flipkart stands to not only add financial muscle but also strengthen its supply chain and enhance efficiency in procurement, product assortment and retailing. India's leading e-tailer, besides, has been looking to open retail stores in India for a long time now but has been waiting for the right investment partner. As such, the partnership between Walmart and Flipkart already seems like a match made in heaven.