Walmart has confirmed that it is acquiring 77 percent stake in Indian e-commerce startup Flipkart for approximately $16 billion. The US-based retailer had to fight with Seattle-based e-commerce giant Amazon for the deal. Japan’s Softbank will exit the company altogether by selling its entire stake to Walmart. Also Read - Flipkart Apple Days sale: iPhone 12, iPhone 11 and more iPhone models up from sale with discountAlso Read - Flipkart Flagship Fest sale: iQOO 3, Moto Razr, iPhone 11 and other deals to consider
In a released statement, Walmart notes that the remainder of the business will be held by Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp. The American multinational retail corporation says that its immediate focus will be to serve the customers and grow the business but it does intend to transition the company into a publicly-listed, majority-owned subsidiary in the future. One of the surprise element is that other Flipkart co-founder Sachin Bansal is leaving the startup. Also Read - Redmi Watch teased on Flipkart ahead of next week’s India launch
As part of the deal, Walmart will also invest $2 billion of new equity funding which will help Flipkart accelerate growth in the future. The release notes that Walmart and Flipkart are also in discussion with additional potential investors who may join the round, which could result in Walmart’s investment stake moving lower after the transaction is complete. Most media reports suggest Google parent Alphabet Inc is considering potential investment in the company.
Both Tencent and Tiger Global will retain their position in the board while Walmart will bring its own new members. The final position of the board has not been determined yet but Walmart plans to have independent members. Walmart is using a combination of newly issued debt and cash on hand to finance the investment.
“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” said Doug McMillon, Walmart’s president and chief executive officer.
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“While eCommerce is still a relatively small part of retail in India, we see great potential to grow. Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and eCommerce to the fore,” said Binny Bansal, Flipkart’s co-founder and group chief executive officer.
Flipkart was founded in 2007 by Sachin and Binny, who were employed with Amazon in the US. The startup has grown to become the biggest e-commerce platform in the country and the face of India’s startup ecosystem. Walmart says it will retain the founding principles of Flipkart and focus on job creation, supporting small business, Make in India, support farmers and develop supply chains and reduced food waste.