Mumbai, May 23: Flipkart and Snapdeal today took a big step towards a merger when they signed a non-binding term sheet. Flipkart, India's largest e-commerce player, will now begin a due diligence of Snapdeal.
A non-binding term sheet means that either player can walk away from the transaction without any obligation.
The merger moves quickened after Japan's SoftBank - Snapdeal's biggest investor - obtained the approval of second-largest investor Nexus Venture Partners (NVP) for the sale to Flipkart. SoftBank had secured the go-ahead for the deal from the founders and Kalaari in April. Reports had said that NVP was not in agreement over the valuation suggested by the Japanese company.
After hectic parleys were held to resolve the matter, SoftBank finally reached an agreement with NVP to move ahead with the sale.
SoftBank - which holds over 30 per cent in Snapdeal - has been pushing for the sale of the company. On the other hand, Nexus has around a 10 per cent stake, while Kalaari holds 8 per cent.
Sources said Snapdeal has been valued at around $1 billion, though the figure could not be confirmed.
Snapdeal was valued at $6.5 billion in its last funding round in February last year. The valuation, however, has subsequently shrunk.
The deal between Snapdeal and Flipkart, if completed, would mark the biggest acquisition in the Indian e-commerce sector. The highly competitive space has seen players with deep pockets such as Amazon continuing its focus on India even as funds have dried up for others with investors harping on profitability.
SoftBank had earlier said it suffered a loss of $1 billion (Rs 6,500 crore) on its investment in Snapdeal during 2016-17.
Flipkart last month raised $1.4 billion from Tencent Holdings, Microsoft Corp and eBay Inc in the biggest-ever fund raising by an Indian internet company
The mobilisation valued the e-commerce player at $11.6 billion. The Bangalore-based company has raised close to $4.7 billion in 11 rounds, mostly from international investors.
Report say that upon merger, Snapdeal founders would get about $30 million each, while NVP could get up to $80 million and a stake in the new entity. Kalaari may also get around $80 million.
CCI approval
The Competition Commission has given its nod to Aceville's acquisition of a stake in Flipkart.
In a tweet, the Competition Commission of India said that it has approved "acquisition of up to 6.02 per cent stake by Aceville in Flipkart".
According to the notice submitted to the fair trade regulator, "the proposed transaction relates to the proposed subscription of shares by Aceville of Flipkart".
