Online marketplace Snapdeal has asked bigger rival Flipkart to pay at least $900 million in stock after rejecting the latter’s latest offer to buy the company, two people familiar with the matter said.
Flipkart is yet to respond to Snapdeal’s demand but the company will send a new offer this week that will be higher than its previous bid of $700-750 million, the two said on condition of anonymity.
Mint reported on 4 July that Snapdeal (Jasper Infotech Pvt Ltd) had rejected an offer of $700-750 million from Flipkart, which had initially proposed buying Snapdeal for close to $1 billion.
The companies hope to agree on the price and the broad terms of the deal by the end of next week, the people cited above said. After that, the companies will continue to negotiate on the final terms of the transaction, they said.
The process of selling Snapdeal’s other businesses, digital payments app Freecharge, logistics service Vulcan and software provider Unicommerce, is picking up pace and deals to sell these three units may be concluded within the next month, one of the two said.
Flipkart and Snapdeal didn’t respond to emails seeking comment.
Snapdeal, which has raised nearly $2 billion in cash, hit a peak valuation of $6.5 billion in February 2016 when it received $50 million from investors. Since then, Snapdeal, which had been running Flipkart close and was bigger than Amazon India at the time, has struggled. It became an also-ran in India’s e-commerce market, cut thousands of jobs and saw an exodus of senior and middle managers. Its board became dysfunctional as the financial interests of investors clashed. Finally, this March, SoftBank Group Corp., the company’s largest shareholder, initiated talks to sell the company, initially against the wishes of its founders Kunal Bahl and Rohit Bansal, who came around later.
The Snapdeal sale to Flipkart is being done mainly for the benefit of SoftBank and Tiger Global Management, Flipkart’s largest investor. The deal is an attempt at financial engineering by Tiger and SoftBank, which have seen their bets falter to differing degrees since the start of 2016 (SoftBank’s a lot more so than Tiger’s), Mint reported on 17 April.
The sale of Snapdeal is likely to be accompanied by an equity infusion into Flipkart by SoftBank, which is also in talks to buy part of Tiger’s 30-33% stake in Flipkart.
SoftBank’s entry into Flipkart will transform the power dynamics at the board of the online retailer, potentially reducing the influence of Tiger. If the SoftBank deal goes through, Flipkart will have five strong voices on its board: SoftBank, Naspers-Tencent, Tiger Global, early investor Accel and the company’s co-founders Binny Bansal and Sachin Bansal.
Already, partly in anticipation of the deal, Sachin, and in particular, Binny, have increased their involvement in the running of Flipkart, Mint reported on 11 July. In January, Flipkart’s board led by Tiger Global’s Lee Fixel had named Kalyan Krishnamurthy, Fixel’s deputy at Tiger, as CEO of Flipkart.