Less than a week after reports suggested that Snapdeal had accepted Flipkart’s $900 million buyout offer, things have reversed. The Gurgaon-based online marketplace has called off the Flipkart merger. This development was first reported by ET which said that a crucial meeting between the legal and financial representatives of both firms had been called off on Monday. The meeting was meant to have closed the final transaction. But Snapdeal founders wanted to pursue an “independent path” and run a leaner, meaner version of the erstwhile company.
“Snapdeal has been exploring strategic options over the last several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result,” the company said in a statement this afternoon. “We have a new and compelling direction – Snapdeal 2.0 – that uniquely furthers this vision, and have made significant progress towards the ability to execute this by achieving a gross profit this month,” it added.
Snapdeal founders Kunal Bahl and Rohit Bansal had for a while played hard to get. Prior to this announcement, both founders had expressed keenness in selling out to rival Infibeam (as opposed to Flipkart), such that they could retain control of their company. Infibeam is a far smaller operation than Snapdeal. And their union was being opposed by Softbank, Snapdeal’s primary investor. Bahl and Bansal had even rejected Flipkart’s initial buyout offer of $550 million on account of undervaluation. ALSO READ: Snapdeal approves Flipkart’s $900 million buyout offer: Report
After the deal with Flipkart was nearly finalized last week, Bahl and Bansal continued to be unhappy. “The two co-founders have said they will vote in favor of Snapdeal going forward as a smaller, but independent entity, terming it ‘Snapdeal 2.0’,” a source told ET. Snapdeal has some much-needed cash at its disposal after the sale of payments unit FreeCharge to Axis Bank last week. The bank paid Snapdeal Rs 385 crore in cash, and also absorbed FreeCharge’s 200 employees in a first-of-its-kind transaction in the Indian financial services sector. ALSO READ: Axis Bank to acquire Freecharge from e-commerce company Snapdeal
Snapdeal is also scouting for a buyer for its logistics unit Vulcan Express. The company reportedly wants to sell it for Rs 100-120 crore. Possibly Bahl and Bansal were delaying the sale of its core e-commerce operation because they wanted to sell off the non-core assets firsts. Additionally, they needed to build consensus within shareholders, some of whom had opposed the $90 million payout Snapdeal’s initial investors (Kalaari Capital and Nexus Venture Partners) were likely to get if the Flipkart acquisition happened. The marriage would have been the biggest transaction in India’s e-commerce history. However, it wasn’t meant to be.