Walmart, the world’s largest retail stores network, has announced the acquisition of India’s homegrown eCommerce startup Flipkart. The US-based Walmart has acquired 77 percent stake in Flipkart for about $16 billion, making it one of the biggest mergers and acquisition (M&A) deal in India’s startup ecosystem.
Out of the $16 billion, $2 billion is the actual investment in the company while the rest of the money was spent to buy out other stakeholders of the eCommerce firm. As a part of this transaction, SoftBank has completely exited the company, selling its 20-percent stake in the company for $4 billion. Notably, softBank has spent around $2.5 billion to acquire that stake last year.
While SoftBank has exited the company, early backers Tiger Global and Accel Partners and more recent investors like Tencent and Microsoft have retained some shares. Tiger and Tencent will continue to hold board seats.
Doug McMillon, Walmart’s President and CEO, said,
India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading the transformation of ecommerce in the market.
We are confident this group will provide Flipkart with enhanced strategic and competitive advantage. Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.
Further, Walmart said that it will “support Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future.”
Even after the acquisition, Walmart says that Flipkart will continue to operate independently. The statement released by the company says that co-founder and Group CEO will stay on, the other co-founder Sachin Bansal has left the company.
Walmart intends to keep the current management of Flipkart. The Bengaluru team will now report to Marc Lore, CEO of Walmart’s US e-commerce, who joined Walmart after it acquired his company Jet.com in August 2016.
As said earlier, the acquisition is among the biggest in the tech ecosystem and is the largest eCommerce deal globally. The last biggest eCommerce deals were PetSmart buying online pet store Chewy for $3.35 billion in 2017, and Walmart buying Jet.com for $3.3 billion in 2016.
While the Walmart’s investment of $2 billion in Flipkart will help the company accelerate growth in the future, both the companies are also said to be in discussions with additional potential investors who may join the round, which could result in Walmart’s investment stake moving lower.