Walmart eyes Flipkart IPO in as early as four years

14 May, 2018, 00:31 | Author: Gladys Mathis
  • Flipkart-Walmart Deal Key Reasons Why It Matters

Walmart introduced earlier this week that it'll cover £ 16 billion to get a roughly 7 7 per cent stake in Flipkart in what is the USA retail giant's largest-ever deal as well as a move to take on arch rival Amazon at a central growth marketplace.

Interestingly, Walmart also has the right to appoint or replace the Chief executive or other principal executives of the Flipkart group of companies, subject to consultation rights of the Flipkart board and the founder Binny Bansal.

The filing also says that there are no termination fees linked to the deal.

After the deal is made, the minority shareholders in it are Flipkart's co-founder Binny Bansal, China's Tencent Holdings (0700.HK), U.S. hedge fund Tiger Global Management and Microsoft Corp (MSFT.O). The Flipkart share purchase deal is expected to close by 9 March, 2019.

In case, SoftBank decides not to sell, Walmart would be left with about 55 per cent of Flipkart. Walmart, however, did not disclose the per share price of Flipkart at which it is buying its shares. For now, Walmart is pumping $2 billion in cash and purchasing shares worth $14 billion from Flipkart's existing shareholders, the SEC filing said.

Walmart said the IPO will be at "a valuation no less than that paid by Walmart under the share issuance agreement, subject to the satisfaction of certain other conditions regarding such offering (the IPO)".

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In a filing with the Securities and Exchange Commission of the USA, the $500-billion Bentonville, Arkansas-based retailing giant lifted the veil of secrecy ever so slightly on the deal that it has negotiated with the Sachin and Binny Bansal, the unrelated co-founders of Flipkart, and other existing shareholders of the Bangalore-headquartered group that comprises five companies based in India and four in Singapore.

If Walmart proposes to transfer a sufficient number of Flipkart shares such that, following the transfer, it would no longer control a majority of the Flipkart shares or appoint a majority of the Flipkart directors, each Minority Shareholder would also be entitled to transfer all of its Flipkart shares to the proposed buyer or buyers of Walmart's Flipkart shares.

Minority investors holding 60 percent of Flipkart's stocks "acting collectively, may necessitate Flipkart to effect an initial public offering" (IPO) 4 decades after the beginning of their Walmart Flipkart transaction, " the Bentonville, " Arkansas-based retailer said at a May 11 filing with an U.S. Securities and Exchange Commission.

The Flipkart board will initially have 8 directors, as per the filing. For at least two years following the closing of the transactions, two of the Walmart-appointed directors must be unaffiliated with Walmart.

It said among other transfer restrictions and subject to certain exceptions, transfers of Flipkart shares will be subject to a right of first refusal exercisable by Walmart and other significant minority shareholders, and in certain situations, co-sale rights.

Even the financial Times newspaper reported Friday, citing unnamed sources, that Japan's SoftBank team, that owns a roughly 20 per cent stake in Flipkart, has been devoting its exit because to tax obligations since it observed farther price in Flipkart.

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