Snapdeal-Flipkart merger may not happen after all
31 July 2017
The buyout of ailing e-retailer Snapdeal by Indian ecommerce market leader Flipkart, which appeared a near-certainty last week, appears to be falling apart after six months of negotiations.
Law firm J Sagar Associates and banker Credit Suisse, which are representing Snapdeal in the negotiations, were to meet with their counterparts representing Flipkart - Khaitan & Co and Goldman Sachs - over today and Tuesday to try and close the transaction. But the talks have been cancelled, according to according to The Economic Times citing three people aware of the developments.
A public announcement on the fate of the deal could be made today.
The deal that could have altered the Indian startup landscape and had the blessings of Japan's SoftBank - the largest investor in the Gurgaon-based Snapdeal - is now on shaky ground in the absence of backing from Snapdeal founders Kunal Bahl and Rohit Bansal, reports said.
According to Business Standard citing sources close to Snapdeal, the co-founders are actively working towards a 'Plan B' and have taken into confidence most of their senior management. The two have been fighting SoftBank, the biggest investor in the company, 'tooth and nail' to prevent the deal from happening.
"The two co-founders have said they will vote in favour of Snapdeal going forward as a smaller, but independent entity, terming it 'Snapdeal 2.0'," said one of ET's sources.
While there have been reports that listed ecommerce company Infibeam had also held talks with Snapdeal for a potential merger, most reports said a merger between the Ahmedabad-based company and Snapdeal were slim.
The founders have acquired new confidence as the recent sale of digital payment subsidiary Freecharge to Axis Bank for $60 million has fetched enough cash for Snapdeal to survive. They are also looking forward to the sale of their logistics subsidiary Vulcan Express for $15.6-$31.2 million (Rs100-200 crore).
Snapdeal and SoftBank did not reply to emailed queries from ET on the developments. Sidharrth Shankar, partner at J Sagar Associates and the lead legal counsel for Snapdeal's parent Jasper Infotech, declined to comment.
As per the terms of the bid put in by Flipkart, the Bengaluru-headquartered domestic e-retail leader has asked for 100 per cent approval from Snapdeal stakeholders before going ahead. It has also included several indemnity-related clauses in the agreement.
On 17 July, Flipkart had made a second bid for the struggling online marketplace of about $850 million, two weeks after its initial offer was rejected.
It is yet unclear whether a dragalong clause in Snapdeal's shareholder agreement can still be enforced to ensure the transaction goes through, according to ET.
Further, a group of minority stakeholders in Snapdeal has objected to the special payout, estimated at about $90 million, to early investors Kalaari Capital and Nexus Venture Partners, as well the overall structure of the transaction.