Walmart Likely to Acquire Majority Stake in Flipkart by June

Walmart Inc. on Thursday seems to be on the verge of achieving its biggest acquisition of an online business, as the retail giant is reportedly close to acquiring a majority stake in India’s leading e-commerce group Flipkart.

Two people with knowledge of the matter said Flipkart may be considering selling a controlling stake to the brick-and-mortar store operator, rather than online retailer Amazon.com Inc., due to a higher chance of reaching an agreement.

Both US companies are trying to buy a stake in the Bengaluru-based group at a valuation of about $20 billion.

Walmart last week was reported to have completed its due diligence on Flipkart and made a proposal to acquire 51 percent or more of Flipkart for between $10 billion to $12 billion.

Sources stated that Walmart will buy both new and existing shares of Flipkart, with the new shares likely to lift the e-commerce firm’s value by at least $18 billion, while the price for existing shares would value the company at about $12 billion.

A deal has not yet been finalized, with Walmart, Flipkart, and its investors still at the negotiating stage, but an agreement is expected to be completed by the end of June. Both companies have not commented on the matter.

Walmart Deal vs. Amazon Deal

The two people said Flipkart’s board was more confident that Walmart will be able to close the deal in a quicker and smoother manner, given that the company does not have any online retail presence in the country so far, which means it has fewer regulatory hurdles to address.

If Flipkart and Walmart reach an agreement, the Arkansas-based corporation will have better fighting chance against Amazon for a larger share of India’s e-commerce market, which is expected to be worth $200 billion in a decade.

The company will also have a notable partner that is highly skilled in retailing, logistics, and supply chain management.     

Walmart has long tried to access the vast e-commerce market of the country, but has remained as a cash-and-carry wholesale business amid tough regulations on foreign investment. It currently has 21 stores in India.   

By contrast, a deal with Amazon would strengthen the market and allow chief executive Jeff Bezos to increase investments in the country. The Seattle-based company including its fashion divisions runs almost 40 percent of India’s online retail market.   

Still, a contract with Amazon may complicate things with the deal, due to possible regulatory problems that could arise, as a Flipkart-Amazon combination would have over 70 percent of the country’s online retail market.    

Following the news, shares of Walmart were up by 0.9 percent to $86.75, while Amazon’s gained 1.5 percent to $1,448.46 on Thursday.

HQBroker is here to give you a daily news roundup about the forex, commodities, technologies, automobiles, and economies. You can open an account now and make yourself updated with essential news in the market. Share your thoughts and experiences with us by commenting your HQBroker reviews.