Walmart, the US-based retail giant today announced that it has successfully completed the deal to acquire Flipkart for USD 16 billion. Since the transaction is now complete, Walmart now holds a 77% stake in the Indian e-commerce major. Walmart’s investment includes USD 2 billion of new equity funding to help accelerate the growth of the Flipkart business. For the unaware, the Flipkart-Walmart deal was announced in May this year, and it’s the largest one so far in the Indian retail space. This is also Walmart’s biggest acquisition and will help it compete more aggressively with its US-based rival Amazon.
“With the completion of the investment, Walmart now holds approximately 77% of Flipkart. The remainder of the business is held by other shareholders, including Flipkart co-founder Binny Bansal, Tencent, Tiger Global and Microsoft Corp,” a statement said, according to PTI.
Flipkart’s existing management team will continue to lead the business. Walmart and Flipkart will retain their individual brands and separate operating structures in the country.
Sachin Bansal, who co-founded Flipkart with Binny Bansal in 2007, has exited the company after the deal. Also, SoftBank, which had invested USD 2.5 billion in Flipkart last year, has also exited the e-commerce firm, raking in about USD 4 billion from the deal.
Last week, fair trade regulator Competition Commission of India (CCI) gave its approval to the transaction despite opposition from various trade bodies, including Confederation of All India Traders (CAIT).
Mergers and acquisitions beyond a certain threshold require the approval of the CCI. The statement issued today said members from Walmart would join Flipkart’s Board, along with representation from existing investors Tencent Holdings and Tiger Global Management LLC as well as independent board members.
Also, Flipkart’s financials will now be reported as part of Walmart’s International business segment. Walmart said in FY20, Walmart anticipates a headwind of around USD 0.60 on its earnings per share (EPS) as the company looks to accelerate growth in the Indian market.
“Our investment will benefit India by providing quality, affordable goods for customers while creating new skilled jobs and opportunities for suppliers,” Judith McKenna, president and CEO of Walmart International, said.
She added that the two companies could achieve more “together than each of us could accomplish separately” to contribute to the economic growth of India. Walmart, which currently operates 21 cash-and-carry stores in India, is keen on working with Flipkart to grow in India, which is one of the fastest-growing and most attractive retail markets in the world.
Binny Bansal, Flipkart co-founder and group chief executive officer, said by combining Walmart’s omnichannel retail expertise, supply-chain knowledge and financial strength with Flipkart’s talent, technology and local insights, we are confident that together we can drive the next wave of retail in India”.
The deal will also give Flipkart more muscle to compete with Amazon in the Indian e-commerce market that is slated to grow to USD 200 billion in a decade.
Amazon, which has invested in Indian retail chain Shopper’s Stop has pumped substantial funding across operations like marketplace and payments. Its founder, Jeff Bezos has committed an investment of USD 5 billion in the Indian market. Both Flipkart and Amazon.in have been investing heavily towards building warehouses, strengthening logistics and increasing product assortment.