As per the deal, SoftBank Group Corp, which is one of the biggest investors in Flipkart, through its Vision Fund, would sell its 20-plus per cent stake in the company for around $20 billion valuation.
Earlier this week, Inc42 reported that Flipkart has set aside $400 Mn to buyback shares of minority investors. Tech giant Google's parent company Alphabet Inc would also tag along with Walmart for an investment in Flipkart.
Flipkart is reported to have bought back shares worth $350 million from investors in its Singapore-based parent to regain its private company status ahead of its sale to U.S. retail giant Walmart Inc.
There are various reasons Walmart decided on Flipkart instead of other players in India's sprawling e-commerce space, such as Snapdeal or ShopClues, the primary being its large logistics network and its capability to withstand an onslaught from Amazon. SoftBank invested in Flipkart previous year through its investment arm SoftBank Vision Fund and held a little over 20% stake in the ecommerce major. Meanwhile, the e-tailer completed another round of buybacks of its shares valued at $350 million (Rs 2,275 crore) from its investors, according to its regulatory filing on Thursday.
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The Amazon bid offers a breakup fee of $2 billion, while the Walmart offer includes the buyout of over 80% stake. Co-founder, Binny Bansal, will probably remain after the merger since reports have indicated that Walmart is keen on keeping one of them. Walmart also plans to develop a grocery marketplace using Flipkart.
Binny Bansal and Krishnamurthy, a former executive at Flipkart's most influential shareholder Tiger Global Management, are likely to stay back after the deal.
The world's largest online retailer has been pouring billions of dollars into India to ship goods to shoppers faster, contributing to growing losses internationally.
"The stakes are really high for Walmart", said Brian Yarbrough, senior research analyst with Edward Jones. Any Flipkart-Amazon deal would have come under the scanner of the competition watchdog given their dominant market share - around 70 per cent collectively - in the Indian e-commerce market.