Sci-tech

Walmart may come up with IPO for Flipkart in 4 years

Walmart may come up with IPO for Flipkart in 4 years

Under the deal, SoftBank Group will sell the entire 20% stake it holds in Flipkart through an investment fund, less than a year after the Japanese conglomerate invested $2.5 billion in the e-Commerce giant.

This would be done at a valuation no less than that paid by Walmart under the share issuance agreement. It is now only a matter of time for the deal to finish as it awaits the clearance from India's anti-trust regulator hence expected to close later this year.

Upon the terms and subject to the conditions set forth in the Share Purchase Agreement, contemporaneously with the closing of the Share Issuance, Walmart will purchase from the Sellers Preference Shares and Ordinary Shares of Flipkart for an aggregate purchase price of approximately $14 billion in cash (the "Secondary Share Purchase", and together with the Share Issuance, the "Transactions"). Minority shareholders holding 60% of Flipkart's shares "acting together, may require Flipkart to effect an initial public offering following the fourth anniversary of the closing of the transactions", said the retailer. The clause will help Walmart persuade Binny and Flipkart CEO Kalyan Krishnamurthy, who was a top executive at Tiger Global, to stay with the firm for a period of at least four years.

The filing also says that there are no termination fees linked with the transaction.

It also said it could appoint or replace Flipkart's chief executive and other key executives of group companies in consultation with Bansal and the board.

The logo of Flipkart is seen on the company's office in Bengaluru.

The US retail major will initially appoint five directors on the board of the Indian company and may appoint an additional director in future.

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Apart from outlining Flipkart's IPO plans, Walmart also detailed other clauses of its shareholding agreement, including the constitution of the Flipkart board for the next two years.

Moreover, holders of 40 per cent of Flipkart shares held by the minority shareholders - or a combine holding of 9.2 per cent of the total equity - will be able to veto "certain material, non-arms' length transactions between Flipkart and Walmart". Post which the USA retailer's shareholding is likely to cross 85%.

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.

The right of first refusal for the minority shareholders will expire if Walmart owns 85 per cent of the outstanding shares of Flipkart, it added.

For Walmart, the acquisition opens a new front in its battle with Amazon, which had expressed interest in making a competing offer for a stake. Also, at this present juncture, Walmart's filing is vital when Flipkart's main stakeholder, Tokyo-based SoftBank, is yet to make up its mind about the sale of its shares. If the drag along right is exercised, each Minority Shareholder must be entitled to sell all of its shares in the proposed transaction.

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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