Walmart seeks competition panel nod for Flipkart stake purchase
19 May 2018
Walmart Inc has approached the Competition Commission of India for approval of its proposed $16-billion acquisition of a majority stake in Indian ecommerce major Flipkart, saying the deal doesn't raise any competition concerns.
In a filing sent to the CCI which was accessed by sections of the media, Walmart said its proposed buyout of Flipkart does not create any competition concerns and that the broader retail market in India would remain unaffected by the deal.
The proposed acquisition would be done through its subsidiary Wal-Mart International Holdings, Walmart has told the fair trade regulator, adding that Flipkart is a Singapore-based investment holding firm, which along with its direct and indirect subsidiaries, both in India and elsewhere, is primarily engaged in the business of wholesale cash and carry of goods and in providing marketplace-based ecommerce platforms to facilitate trade between customers and sellers in India.
Walmart is the world’s largest retailer but in India, it only has a wholesale cash-and-carry business due to government regulations against foreign investment in multi-brand retail.
Last week, Walmart India chief executive Krish Iyer said the company plans to open 50 new stores within the next five years, up from 21 stores now. Because of regulations banning FDI in direct online retail, Flipkart has adopted a complicated structure which comprises partially of a B2B entity and a B2C entity, Livemint reports.
Mergers and acquisitions beyond a certain threshold require the approval of the Competition Commission of India (CCI).
According to the notice submitted to the CCI by Wal-Mart International Holdings, the proposed transaction will be effected pursuant to the share purchase agreement and the share issuance and acquisition agreement entered into on 9 May by and among Walmart's subsidiary and Flipkart.
“The proposed transaction does not give rise to competition concerns, and therefore, the precise scope of the relevant market may be left open. Without prejudice to the above, for the sake of completeness and with a view to assist the Hon’ble Commission, it is submitted that the relevant market for the purposes of the Proposed Transaction is the pan-India market for B2B sales,” Walmart said in the filing on Friday.
Last week, Walmart agreed to pay $16 billion to buy a 77-per cent stake in Flipkart, valuing the online retailer at about $21 billion in what is the biggest ecommerce buyout in global history. As part of the deal, Walmart has agreed to invest $2 billion directly in Flipkart and buy the rest of its stake from Flipkart’s investors including SoftBank Group, Accel Partners, Naspers and eBay Inc. Walmart is also in talks to bring along new strategic investors such as Google.