Walmart finishes due diligence on Flipkart, may pay $10-12 bn for stake

Walmart completed a thorough due diligence process on ecommerce firm Flipkart this week, Reuters reports. The US retail giant is looking to take a controlling stake of 51-per cent or more in the Indian company.

Walmart has already floated a shareholder agreement, or offer proposal, and is looking to shell out about $10 billion to $12 billion for the stake that would value Flipkart at roughly $20 billion, one of Reuters’ sources said.
A deal is far from finalised, however, and talks between the two parties and investors in Flipkart are ongoing, said another source.
A stake in Flipkart would pit Walmart against Amazon.com in India, and according to media reports Amazon is exploring a rival offer for India's largest home-grown ecommerce player.
Walmart is now seeking a bigger stake than previously expected. It was reported in February that Walmart was in talks to purchase a stake of over 40 per cent in Flipkart, which is backed by the likes of SoftBank Group, Tiger Global, eBay, Accel Partners, Naspers, Tencent Holdings and Microsoft Corp.
Walmart and Flipkart declined to comment. SoftBank also declined to comment, while Tiger, its other lead investor, was not immediately reachable for comment.
Bengaluru-based Flipkart, started by two former Amazon employees, is fighting Amazon to grab a bigger piece of India’s massive online retail market which, according to Morgan Stanley, could be worth $200 billion in a decade.
Walmart’s investment would give Flipkart not just additional funds to fight Amazon, but also arm it with a formidable ally with extensive experience in retailing, logistics and supply chain management.
It is seen as a more likely investor than Amazon. A person familiar with the matter told Reuters that the probability of a Flipkart-Amazon deal was low, and that such a deal may spark competition fears as Flipkart and Amazon dominate India’s e-commerce market.
For Walmart a deal would open up a vast market and another front to take on its biggest rival. It may look to bring in some of its own people on the legal and finance teams at Flipkart, one of the sources said.
Walmart would also likely have a say in the appointment of a chief financial officer at Flipkart, if the deal is concluded, said another of Reuters' sources.
Two of the three sources said Tiger Global Management, Accel Partners and Naspers were likely sell their entire stakes in Flipkart to Walmart if a deal is reached. Japan’s SoftBank, which has invested in Flipkart through its Vision Fund, may also consider selling a part of its roughly 20-per cent stake if Walmart offers a good price.
SoftBank last year invested $2.5 billion in Flipkart through prime and secondary share purchases (See: SoftBank Vision Fund invests $2-2.5 bn in Flipkart).