Zomato Shareholders Approve Blinkit Acquisition Deal

SUMMARY

With this, Zomato will acquire 33,018 equity shares of Blinkit for INR 4,447 Cr ($570 Mn) in an all-stock deal by issuing 62.85 Cr shares

Blinkit shareholders are going to be swapping the company stake for INR 70.75 a piece, a 41.34% premium from Zomato’s closing price on the day of the resolution

Zomato and Blinkit expect to close the deal in early August and after which both the companies will continue to operate independently

Zomato’s proposal to acquire the hyperlocal quick commerce startup Blinkit has received 97% shareholders’ nod, as per the company’s BSE filing.

Following the majority approval, Zomato will acquire 33,018 equity shares of Blink Commerce Pvt Ltd (Blinkit) for INR 4,447 Cr ($570 Mn) in an all-stock deal by issuing 62.85 Cr shares (a 6.7% stake) of Zomato on a preferential basis for consideration.

The price of Zomato’s shares at which the deal was concluded is INR 70.75 — a 41.34% premium from Zomato’s closing price on the day of the resolution being passed.

Although the said acquisition deal between Zomato and Blinkit has been touted as one of the reasons why the share prices are tanking for the past few weeks.

While a large number of public institutions opposed the deal (14.6%), the public non-institutions were in solidarity with the Zomato-Blinkit deal with only 1% of votes opposing the deal. In the filings, Zomato stated that 19 shareholders who collectively held 37.57 Lakh equity shares abstained from voting on the resolution.

This comes almost a month after analysts in conversation with Inc42 stated that many investors don’t approve of it adding another loss-making company to its portfolio. They had stated that the deal may weigh on the stock in the short term.

True to the prediction, in the last week, the share price of Zomato hit a new low at INR 41.5 on July 27, 2022 – going down by more than 47% in the last three months.

While the company had an impressive stock market debut, it has wiped over 45% of the value from its offer price within a year of listing.

Previously, Zomato CEO and founder, Deepinder Goyal, has on numerous occasions affirmed that the business of Blinkit is synergistic with its core food business and will turn profitable by 2025.

Zomato, on the other hand, continues to be a loss-making entity, reporting a loss of INR 1,222.5 Cr in FY22. This, alongside the market volatility, relatively cheaper valuations of its global peers and investors’ focus on profitable companies, might have been a reason for the downslide of the foodtech giant’s valuation.

Zomato and Blinkit expect to close the deal in early August and after which both the companies promise to operate independently.