Snapdeal rejects Flipkart's Rs5,500 cr buyout offer; talks still on

Snapdeal's board is reported to have rejected a takeover offer of $800-850 million (around Rs5,500 crore) from larger ecommerce rival Flipkart.

Flipkart had completed the due diligence process and has made an offer of $800-850 million to buy Snapdeal.  But, the offer was rejected by the Snapdeal's board, which felt the amount undervalues the company as the due diligence report is clean, according to PTI and others.

"The first offer has been rejected but talks are still on. It is an ongoing discussion," said one of PTI's sources.

Snapdeal, SoftBank and Flipkart declined to comment.

''The board is unhappy with Flipkart pegging the valuation nearly $200 million less, even though Snapdeal cleared the due diligence. The board is, however, hopeful Flipkart would reconsider the offer,'' a source told Business Standard.

SoftBank, the Snapdeal's largest investor, has been proactively mediating the sale for the past few months. The Snapdeal board also has representation from Snapdeal founders Kunal Bahl and Rohit Bansal, NVP and Kalaari Capital.

As per a report in The Economic Times, SoftBank is expected to invest about $1.5-2 billion in Flipkart, once the Snapdeal acquisition is closed.

Ernst & Young, which was roped in by Flipkart to conduct a due diligence on Snapdeal, submitted its report a few days ago, following which the offer was made.

The deal between Snapdeal and Flipkart, if completed, would mark the biggest merger & acquisition in the Indian ecommerce space.

One of the leading contenders in the Indian e-commerce space, Snapdeal has seen its fortunes failing amid strong competition from Amazon and Flipkart.

Compared to a valuation of about $6.5 billion in February 2016, the sale to Flipkart could see Snapdeal being valued at about $1 billion.

SoftBank has already written off over $1 billion on valuation of its investment in Snapdeal.

Flipkart had an exclusivity period to make an offer by 2 July. Reports say the negotiations are expected to continue as Flipkart's offer was only for Snapdeal's marketplace and does not include the organisation's logistics business Vulcan and its payments arm Freecharge.

Snapdeal is reportedly ready with a Plan B. ''The board might look at other buyers or finally give the go-ahead to Snapdeal's plan. The company might sell its sister concerns such as the logistics arm Vulcan Express and FreeCharge, run some of the operations and work towards an exit. It all depends on Flipkart's next move,'' sources informed Business Standard.

The deal has been in troubled waters as small shareholders in Snapdeal have reportedly expressed discontent over the sale. These include Azim Premji's investment firm PremjiInvest.

Flipkart is expected to make a revised offer soon, reports say.