Walmart is completing a deal to buy 77% shares in Flipkart
Walmart, the world’s largest retailer, has completed the acquisition of a majority stake in India’s leading e-commerce market, Flipkrart. In a joint statement issued on Saturday, Wal-Mart and Flipkrart announced the completion of the $ 16 billion deal that would make the US giant own a 77% stake in the Indian company.
The deal, the largest of its kind in the world, was announced in May and was approved by India’s competition watchdog earlier this month. Its closure paves the way for India to become the final battleground in the battle for dominance between Wal-Mart and its biggest competitor, the Amazon.
“Wal-Mart and Flipkart will achieve more synergy than each of us can do separately to contribute to India’s economic growth and create a strong local company backed by Wal-Mart,” said Judith McKenna, Wal-Mart’s chief executive officer. “Our investment will benefit India by providing quality goods at affordable prices to customers, while providing new jobs and new skills to suppliers.”
As decided in May, the current Flipkrt management, led by Chief Executive Kalyan Krishnamurthy, will continue to manage the e-commerce company. Cofounder Binny Bansal, with the exception of representatives of Tencent and Tiger Global, will continue to retain their seats on the company’s board of directors, which will now be strengthened by Wal-Mart representatives.
Wal-Mart said earlier, it would appoint five members of the eight-member Flickrkart board, two of whom would be independent directors who do not belong to Bentonville, Arkansas.
“We are ready and ready to offer the full value of this partnership to India,” said Binny Bansal, co-founder and chief executive officer of the group in Flipkart. “By combining the experience of Walmart stores in the retail sector with knowledge of the supply chain and financial services
Through the strength of Flipkart’s talent, technology and local ideas, we are confident that together we can drive the next wave of retailing in India. ”
The deal will see a number of investors in Flipkart, including Softbank, which has reported a return of 60 per cent on its $ 2.5 billion investment in the Indian company. Sachin Bansal, founder and former CEO of Flipkart, which has led the company for almost eight years, has also gone out and is estimated to have earned just over $ 1 billion through the deal.
Support Wal-Mart will increase Flipkrart’s ability to face the Amazon, which burns more than $ 1 billion a year to win in India. Only in the first two quarters of this fiscal year has Amazon invested 53 billion rupees (about $ 750 million) in its Indian e-commerce business, looking to accelerate growth and gain access to Flipkart.
The deal with Wal-Mart includes a $ 2 billion component that the two companies said would be used to develop Flipkart’s India business.
Analysts expect Flipkrart to continue to drain Wal-Mart’s profits over the next two years, although companies say it was trying to build a profitable business that could be announced within the next five years.
Wal-Mart maintained its guidance that earnings per share for fiscal year 19 would be affected by $ 0.25- $ 0.30 due to interest on loans to complete the $ 16 billion deal. The company also said it expected a corresponding windfall of around $ 0.60 in fiscal year 20 due to the additional investment needed to accelerate Flipkrart’s growth.
Following the rise in Wal-Mart shares earlier this week on strong revenue growth and 40 per cent growth in e-commerce sales in the United States, analysts cut the value of the stock because of Flipkrart’s earnings over the next few years. The US retail giant fell 0.8 percent on Friday before markets closed over the weekend.