The impending merger between the two large Indian e-commerce players – Flipkart and Snapdeal appears to be heading towards a closure with both of them signing an non-binding term sheet agreement. The term sheet agreement is likely to see Snapdeal being valued in the range of $950 million and $1 billion for its merger with Flipkart, according to media reports.
The merger is likely to be largest ever such deal in the decade old Indian e-commerce industry and Flipkart may soon begin the formal due diligence process.
The merger deal had the backing from Snapdeal’s largest investor Softbank, the Japan headquartered internet and telecom conglomerate which has several investments in various Indian startups.
The merger is expected to be a cashless transaction with a certain share swap ratio. It is also likely to see the exit of Snapdeal founders Kunal Bahl and Rohit Bansal. The merged entity will also emerge as a stronger competitor global online retailer – Amazon.
The merger of Flipkart and Snapdeal had been delayed due to certain reservation from the early investors like Kaalari Capital and Nexus Venture Partners. Both these venture capital players had reservations on the lowered valuation of Snapdeal but they have finally come around to agree for the deal.
Snapdeal was valued at $6.5 billion in its last funding round in February 2016. The valuation, however, has shrunk since and the potential deal is expected to see Snapdeal being valued at about $1 billion.
SoftBank currently owns over 30 per cent in Snapdeal, while Nexus has roughly a 10 per cent stake and Kalaari holds 8 per cent share in the firm.
This deal will also mark another large acquisition for Flipkart which in the past has acquired companies such as Myntra and Jabong.