Published: Sat, May 05, 2018
Technology | By Russell Knight

Amazon Enters Fight For Flipkart With Bid For 60% Stake

Amazon Enters Fight For Flipkart With Bid For 60% Stake

Amazon's bid for a majority stake in Flipkart will cut no ice with some of the biggest investors as well as the top management team of India's largest online retailer, as the American giant's offer-made on Wednesday- is not high enough to cover the potential risks, said two people aware of the details.

Amazon is the second-largest e-commerce player in India and Flipkart's primary rival. While details are sketchy, it appears that the Amazon bid values Flipkart at close to $20 billion - 66 per cent higher than the valuation in August a year ago when the Bangalore-based firm raised $1.2 billion from a technology fund backed by Japan's SoftBank group.

- CNBC-TV18 also reported that Amazon had offered Flipkart a breakup fee of $2 billion to convince it to discuss an offer.

Though Amazon's interest in Flipkart is unconfirmed and could just be sly negotiating tactics by either side, any show of insecurity would be surprising.

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Tiger Global which controls around 20 per cent of Flipkart, Naspers which controls around 14 per cent and other smaller investors are all expected to gain full exits from the company post the deal.

E-mails sent to Amazon on the subject remained unanswered till the time of going to press. Amazon, on the other hand, hasn't made the same promises and even intends to have Flipkart's founders sign a non-compete agreement. That has drawn a slew of Indians who are price sensitive to the e-commerce giant.

Flipkart reported a 68 percent jump in losses to Rs 8,771 crore for the year ended March 2017, while revenue rose by 29 percent to Rs 19,854 crore.

Like Walmart, Amazon has been trying to expand in the Indian market where online shopping is starting to increase rapidly. 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.

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The Japanese company's founder and chairman Masayoshi Son saw the potential merger between the two e-commerce behemoths as a way to get his company a bigger play in India's promising e-commerce market.

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Sources said while Walmart is still in talks to buy shares from Flipkart and its investors, the deal will include the purchase of primary and secondary shares.

However, major shareholders such as Tiger Global and SoftBank are not expected to sell any shares in the latest buyback process.

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Walmart had earlier completed its due diligence for the Flipkart deal.

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