Flipkart Ups Snapdeal Merger Offer To $850 Mn – Will The Deal Finally Go Through?

Days after Snapdeal demanded a $900 Mn payout, Flipkart has put forward a revised offer of around $850 Mn. As per reports, the Bengaluru-headquartered ecommerce giant has agreed to pay $650 Mn-$700 Mn in stock as soon as the merger is finalised.

The remaining $150 Mn will be transferred at a later date. Jasper Infotech, the parent company of Snapdeal, was informed of the revised offer late last night.

According to sources, both Snapdeal and ecommerce management firm Unicommerce are a part of the offer. Digital wallet FreeCharge and Snapdeal’s logistics arm Vulcan Express are not included.

This development comes five days after the Kunal Bahl- and Rohit Bansal-founded startup reportedly asked for a payout of at least $900 Mn for the proposed acquisition by Flipkart.

Earlier this week it was  reported that Flipkart is looking to raise $500 Mn from Snapdeal’s majority shareholder SoftBank in the hopes of accelerating the merger. If that happens, the Japanese investment giant will acquire a sizeable share in the merged entity.

If Snapdeal accepts the latest offer, both parties will likely be signing a sale and purchase agreement (SPA) within the next one month.

The Flipkart-Snapdeal Merger: Timeline

Speculations about the Flipkart-Snapdeal merger first surfaced in March 2017, when SoftBank started seeking out buyers. Once valued at $6.5 Bn (in February 2016), Snapdeal has been struggling to remain afloat amidst increased competition from rivals Flipkart and Amazon. In April 2017, the company suffered another blow when its valuation fell to $1 Bn.

As per RoC filings of Jasper Infotech, the online marketplace reported losses of more than $495 Mn (INR 3,315.5 Cr) for  FY2016, as compared to $198.2 Mn (INR 1,328 Cr) in 2015. SoftBank, till date, has invested around $900 Mn in Snapdeal and holds around 33% stake. During the financial year ending in March 2017, the Masayoshi Son-headed telecom and Internet conglomerate reported losses upwards of $1.4 Bn on two of its major Indian bets, Snapdeal and Ola.

Earlier in May, the two signed a non-binding Letter of Intent, following which negotiations begun. Over the last two months, Flipkart has been conducting due diligence on Snapdeal, for evaluating its assets and liability profile. During the first week of July, Snapdeal rejected the other company’s $700 Mn – $800 Mn buyout offer, asking for a slightly higher $900 Mn instead.

Flipkart’s latest offer is in response to this demand by Snapdeal. As part of the proposed merger, SoftBank is also planning to invest $2 Bn in Flipkart, of which the first $500 Mn will serve as primary funding. The remaining amount will be used to buy out one-third of Tiger Global’s shares in Flipkart.

SoftBank In Talks To Sell FreeCharge And Vulcan Express

As per reports, SoftBank will be going through with the FreeCharge sale only after the Flipkart-Snapdeal merger is finalised. FreeCharge’s acquisition talks first came into light in April 2017. At present, Axis Bank is leading the race to acquire the digital wallet for an estimated $100 Mn (INR 625 Cr).

Previously, FreeCharge was in talks with Bank of Baroda, Times Internet, MobiKwik and even rival Paytm. Paytm had reportedly signed a non-exclusive term sheet with FreeCharge in May, agreeing to buy the Jasper-owned startup for $45 Mn – $90 Mn.

On July 10 2017, reports of Chennai-based TVS Logistics Services, PE firm Peepul Capital, and supply chain firm Gati holding talks with Snapdeal’s in-house logistics arm Vulcan Express also came to the forefront. As per sources, the acquisition is expected to take place within the next two months for an estimated $14.4 Mn–$19.2 Mn (INR 90 Cr- INR 120 Cr).

Until Snapdeal accepts Flipkart’s merger offer, the sale of FreeCharge and Vulcan Express are at a standstill. With the Snapdeal ecommerce marketplace in its arsenal and $500 Mn funding by SoftBank, Flipkart will look to present a strong competition to arch-nemesis Amazon.

(The development was reported by Livemint)