Flipkart-Snapdeal merger stuck on valuation of subsidiaries: report

Flipkart is reported to have agreed to a merger of Snapdeal without its two subsidiaries - Vulcan Express and Unicommerce – although at a lower price of around $350-400 million.

Vulcan Express is Snapdeal's logistics arm while Unicommerce is its commerce firm.

In fact, Snapdeal wanted Flipkart to pay an extra $150-200 million for Vulcan and Unicommerce over the current valuation of $1.1 billion for a full merger.

A meeting of the boards of Snapdeal and Flipkart is expected to finalise an agreement without the two subsidiaries being part of the deal. In that case Flipkart's acquisition of Snapdeal could come through in July, at a valuation that is much less than the initially envisaged $1 billion.

It is not known whether Snapdeal would agree to the much-diminished amount for its marketplace, minus its two growing logistics businesses - Vulcan Express and Unicommerce eSolutions.

Snapdeal is also open to de-merging the two firms and selling them separately. The issues are likely to be ironed out later this week.

Investors and promoters have held several rounds of talks, but the two have not yet sorted out the valuation issue. Neither of the two e-commerce players could also arrive at a right timeline for the acquisition.

Flipkart and Snapdeal had signed a non-binding term sheet towards the end of last month, after which Flipkart started its due diligence on Snapdeal, and a deal was expected to be finalised in the first week of July. But that seems unlikely now

Once a deal is struck, the merger, which needs regulatory approvals, is expected to take at least four months.