(G.N.S) Dt. 02 Bengaluru Amazon.com Inc has made a formal offer to buy a 60 percent stake in Indian online retailer Flipkart, a tv channel reported on Wednesday, citing sources. Softbank, the largest investor in the Indian company with around 25 per cent stake, is also expected to sell a big portion of its holding in the deal.
Joining the fray would send a signal that Amazon is less confident of closing the gap with the company founded by Sachin Bansal and Binny Bansal, the unrelated software engineers who briefly worked for the Seattle-based outfit before starting Flipkart in 2007.
Amazon's bid may complicate matters for Walmart, which has also been trying to buy a stake in Flipkart.
Amazon's offer to acquire a majority stake in Flipkart comes at a time when rival Walmart is close to completing a $12 billion deal to pick up an equivalent amount of stake in the Indian firm. However, Amazon was indeed interested in buying Flipkart, said two sources, asking not to be named. Amazon has also offered a break-up fee of $2 billion in order to compensate for negative consequences for severing the Walmart deal.
The financial daily reported that India's largest online retail giant has approximately 145 stakeholders quoting the company's filing with Singapore's Accounting and Corporate Regulatory Authority. The Walmart-Flipkart deal would be Form 1 and an Amazon-Flipkart deal Form 2, said legal experts.
Anyway, Flipkart's investors and founders are leaning towards Walmart's bid and the Sachin Bansal (Flipkart's founder) has already been in the U.S. to negotiate with Walmart's execs. This is where SoftBank suggested that it was open to investing another $3-4 billion in Flipkart, which would be deployed to buy shares from smaller investors and help it maintain around 20% stake in the combine with Amazon.
A Common myna sits next to the logo of India's e-commerce firm Flipkart.
India's ecommerce market, which is estimated to be worth $200 billion over the next decade, has been hotly pursued in recent years by both Amazon and Walmart, without great success; thus, the intense interest in leading player Flipkart.
Investors expect faster returns from Walmart's investments compared to Amazon, said Yarbrough, a move that limits the brick-and-mortar retailer's ability to spend big on acquisitions in growth markets.