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Walmart buys majority stake in Flipkart

Flipkart

New Delhi: Walmart Inc has signed a definitive agreement to acquire roughly 75% stake of online retailer Flipkart and has agreed to pay Rs $16 billion.

The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, China’s Tencent Holdings Ltd, Tiger Global Management LLC and Microsoft Corp, the company said in a statement on Wednesday.

It will also rope in internet search giant Google as a new investor in which the company is expected to invest about USD 1.5 billion for about 7 percent stake.

Sources indicated that these investors will likely have the option of selling their stake to the Bentonville-based retailer at a later date at the same valuation at which Walmart bought a majority stake in Flipkart.

SoftBank, which owns 20.8 percent stake in the company will exit completely. The Masayoshi Son-controlled Japanese company will make a neat profit by selling its stake in Flipkart, with its investment of USD 2.5 billion set to fetch about USD 4 billion, a gain of 60 percent.

Tencent Holdings and Tiger Global Management will continue to be represented on the board.

It was not immediately known how much of stake group CEO and co-founder Binny Bansal—will retain. He currently holds 5.25 percent stake in Flipkart.

Flipkart will be listed on Indian stock exchanges in the subsequent years, as a fully-owned Walmart subsidiary, a corporate strategy similar to what it has adopted in Mexico.

Walmart India and Flipkart will continue to maintain distinct brands after the deal.

New investors can pick stake in Flipkart in a fresh round, which could bring down Walmart’s holding slightly, even though it will continue to retain a significant majority holding.

Walmart will likely use a mix of fresh debt and cash to finance the deal. After the deal’s closure, Flipkart’s financials will be reported as part of Walmart International.

This will be the second time when Walmart and Google will join hands to get a toehold into the online retail space dominated by Jeff Bezos-controlled Amazon.

Last year, both the companies had struck a partnership through Walmart products are sold on Google Express, the internet search giant’s online mall. Indian consumers can also look forward to personalised voice shopping of Walmart and Flipkart products by simply speaking out the orders to Google Home devices

This will be Walmart’s largest acquisition in the e-commerce space. It had acquired Jet.com for USD 3.3 billion in 2016. Last month, Walmart gave up control of its UK grocery chain Asda, merging it with British retailer J Sainsbury Plc. Walmart will retain a 42 percent stake in the combined company.

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