Walmart may list Flipkart in few years after buyout: 3 things to know about $12 billion deal

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Published: May 8, 2018 10:57:15 AM

Walmart-Flipkart deal: The world’s largest retailer Walmart is all set to sign on the dotted line, and is likely to announce its much-anticipated deal to buy a controlling stake in Flipkart before the end of this week.

Walmart Flipkart deal, Walmart-Flipkart billion deal, Flipkart dealThe Indian e-commerce player Flipkart will look to leverage Walmart’s retail expertise and its knowledge of the grocery and merchandise supply chain management.

Walmart-Flipkart deal: The world’s largest retailer Walmart is all set to sign on the dotted line, and is likely to announce its much-anticipated deal to buy a controlling stake in Flipkart before the end of this week, Reuters reported citing two sources. Arkansas-based Walmart will pick up a 60 percent stake in Flipkart for $10-12 billion, while Google’s parent Alphabet will get a roughly 15 percent stake in the online marketplace for about $3 billion, the agency reported a source as saying. According to a CNBC TV18 report, Walmart has said that it will take Flipkart public and make it a majority owned subsidiary in a few years, according to their sources. Further, the channel reported that Google will will come on board as a new shareholder in Flipkart and Softbank will exit Flipkart. We take a closer look at the all-important deal, and bring you 3 key things to know.

Sachin Bansal to exit

Flipkart co- Sachin Bansal would exit after the Walmart deal is sealed, Reuters reported quoting sources. Last year, the Indian e-commerce major Flipkart had named Kalyan Krishnamurthy, a former executive of investor U.S. hedge fund Tiger Global Management, as the head of its core business, while Binny Bansal took the broader strategic role of group CEO. Notably, Sachin and Binny Bansal, founded Flipkart in 2007, after leaving their former employer Amazon. Reuters report added that that Walmart is expected to get three board seats at Flipkart and will also have a say in the appointments of the group’s finance, legal and compliance heads. Krishnamurthy and Binny Bansal will remain in their current roles after the deal, according to the sources.

How the deal is funded

The $12 billion deal is expected to include $2 billion in new equity funding, and the remaining portion of the deal will be funded with existing cash reserves and new debt, CNBC TV18 reported citing sources.  However, Walmart is likely to face headwinds on its per-share earnings after the deal. Further, even though Walmart and Flipkart are in talks with other potential investors, the American retail giant is expected to hold a majority stake in the combined entity, the channel reported quoting sources. “Other investors could participate in raising funds after the acquisition is closed, and  Flipkart’s financials will be reported as part of Walmart international,” CNBC TV18 said.

The synergies

The Indian e-commerce player Flipkart will look to leverage Walmart’s retail expertise and its knowledge of the grocery and merchandise supply chain management. Further, Flipkart and Walmart will operate distinct brands, the channel reported.

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