By Elton Gomes
Amazon has made a formal bid for a 60% majority stake in Flipkart, CNBC TV-18 reported, citing anonymous sources. Amazon is reportedly seeking a non-compete agreement from Flipkart’s founders. Amazon’s bid comes on the heels of Walmart’s acquisition attempt. Walmart is reportedly already in advanced talks with Flipkart.
However, the acquisition appears to have gathered some serious drama, making the Indian startup the belle of the ball, with both the American companies vying for a stake in Flipkart.
Here’s what happened
On April 4, Reuters reported that Amazon might make an offer to buy Flipkart. The Indian e-commerce company was already in talks with Walmart at the time. The report mentioned that a deal with Walmart was likely, but, Amazon had held early exploratory talks to buy a controlling stake in Flipkart.
Individuals privy to the matter were confident that Flipkart would consider sealing the deal with Walmart, which was in talks to purchase 55% of Flipkart. The American company aimed to do this via a mix of primary, and secondary purchases that could value Flipkart at $21 billion, sources told Live Mint.
However, no official statement has been issued by either Amazon, Flipkart, or Walmart so far.
Amazon’s new offer of buying a 60% stake in Flipkart also comes with a breakup fee of $2 billion. The Financial Express cited a Bloomberg report, which stated that Flipkart was strongly considering Walmart for the deal, taking into account its absence in India. Flipkart’s board eventually decided to partner with Walmart, as it would face fewer regulatory hurdles.
According to a report by CNBC, although Flipkart has received a formal offer from Amazon, Walmart continued to be a frontrunner in the deal. Flipkart’s founders Sachin and Binny Bansal both allegedly favour Walmart over Amazon.
However, if Flipkart and Amazon were to combine forces, they would be able to control a little over 80% of the e-commerce market in India. This could raise some concerns with India’s anti-competition regulators, the Business Standard reported.
According to the Financial Express, a potential Amazon-Flipkart deal comes in light of Amazon CEO Jeff Bezos’s plan to invest $5.5 billion this year. Bezos claimed that Amazon’s India website is the fastest growing market in India, and is the most visited site on desktop and mobile.
If the Amazon-Flipkart deal goes through, Flipkart will be able to expand its reach significantly. What is more, one of Flipkart’s investors, SoftBank, also aims to expand its reach, after it invested $2.5 billion for a 24% stake in Flipkart, the Financial Express reported.
Why you should care
Indian users are likely to be offered quite a few sweet deals in the future, regardless of whether Flipkart decides to join forces with either Walmart or Amazon. company Buying a major stake in Flipkart might however, help pave the way for Walmart to make a grand entrance into the Indian e-commerce market.
What is more, Flipkart may gain an opportunity to establish an international presence if it teams up with either Amazon or Walmart. The home-grown e-commerce giant has come a long way from its startup days, indicating the potential for growth in the Indian e-commerce sector.