At a time when Walmart has completed due diligence as part of its offer to pick up a majority stake in Flipkart, Amazon is reportedly pushing its own offer to buy the ecommerce giant and has offered a ‘breakup fee’ of $1 billion-$2 billion, reports FactorDaily.
Amazon seems to be serious in its offer to Flipkart, due to which it doesn’t want the talks between Walmart and Flipkart to go through.
According to FactorDaily, A breakup fee is something offered by a party -- which is serious on its intent of a merger or acquisition – and is paid to the other party if that deal doesn’t go through successfully.
If Flipkart and its investors accept the deal, Amazon will file a pre-filing consultancy request before anti-trust regulator Competition Commission of India (CCI) with preliminary details of the impact of the merger.
However, there is no confirmation on this development from either Amazon or Flipkart.
Mint reported earlier this month that Amazon is looking to put in a rival bid and is in early exploratory talks to buy rival Flipkart.
Walmart, on the other hand, has completed the due diligence process on Flipkart as it looks to pick up a controlling stake of 51% in Flipkart.
According to a Reuters report, the US retail giant has floated a shareholder agreement and is looking to shell out anywhere between $10 billion to $12 billion for a stake that is likely to value Flipkart at around $20 billion.
If Walmart offers a good price, Flipkart’s newest investor SoftBank may also sell a part of its 20% stake in the ecommerce major. Its other investors such as Tiger Global Management, Accel Partners and Naspers are likely to sell their entire stakes in Flipkart to Walmart.
However, Amazon offering a breakup fee at this stage points towards the seriousness on the US ecommerce giant to stay put and stay on top of the Indian ecommerce market. Amazon has already committed nearly $5 billion to take on Flipkart.
And if a deal with Amazon goes through, it would create India’s largest ecommerce firm and severely hurt other ecommerce players such as Paytm Mall, Shopclues and Snapdeal.