Just a day after Snapdeal rejected Flipkart’s offer over undervaluation, a new report has emerged indicating there will be a refreshed acquisition proposal. After conducting due diligence on Snapdeal over a course of eight weeks, Flipkart made the $800-900 million offer to Snapdeal. However, the latter rejected the offer as it wanted a higher valuation.
Flipkart has reportedly asked for 30 more days to get back to Snapdeal with a new proposal for an all-stock acquisition. According to CNBC-TV18 sources, Flipkart could come back with a revised offer in the next one week. Even as Flipkart has asked for an extension, it is yet to be approved by Snapdeal.
One of the people aware of the deal is quoted as saying that Flipkart wants to have the extended period so that even if there are further negotiations to happen a few more times, then there will be still enough time to arrive at an agreement and no one else picks up the opportunity to acquire the struggling online marketplace, Moneycontrol reports. ALSO READ: Flipkart, Snapdeal in merger talks as competition grows in e-commerce space: Report
While a similar instance has been recorded in the past when Snapdeal wanted to acquire Jabong but ran out of the exclusivity period, following which Flipkart scored the goal. However, in the current scenario, given Snapdeal’s market situation, there is unlikely to be a competition between multiple suitors.
Another source is quoted as saying that the request for an extension might also be a way for Flipkart to see how Snapdeal is able to run the operations in the next 30 days. “It will be interesting for Flipkart to see if the company struggles with limited amount of money left in the bank. In that case, as a second offer, Flipkart may come up with a more stringent term sheet with an even lesser valuation,” the person said.
In an adverse situation where Snapdeal is unable to strike the deal with Flipkart, the online marketplace is working on an alternate plan where it plans to cut down on its costs. And such a move would mean another round of layoffs which would affect 600-1,000 people in the company. The cost-cutting plans might also include separating Snapdeal’s non-core businesses which include digital payment platform Freecharge and Vulcan, along with shutting down its warehouses. ALSO READ: Flipkart resumes high-value deliveries in UP and Bihar after GST relaxes tax norms
If past reports are to believed, Freecharge is already gaining interest from current mobile wallet leader Paytm along with other companies including Times Internet and Bank of Baroda. Vulcan, which is Snapdeal’s in-house logistics arm, was reportedly in talks with Future Group and TVS Logistics for acquisition.
What particularly came as a disappointment to Snapdeal stakeholders was Flipkart’s term sheet for an all-stock acquisition of $550 million, which was almost half of the earlier estimated valuation of $1 billion. In addition to that, the term sheet is also said to have holdbacks and conditions making the proposal complicated and leading Snapdeal to seek a revised offer.
Meanwhile, Amazon India – Flipkart’s biggest rival in the e-commerce marketplace, has reportedly made another fund infusion in its core local unit Amazon Seller Services, taking its overall investment in India to $2 billion. RELATED: Amazon Prime Day Sale starting in India on July 10: Discounts, offers and more