Despite the rumors that rival Amazon may be interested in taking over Flipkart, the online retailer appears to be silently making progress to complete the formalities of Walmart picking up a majority stake in it. One of the steps being initiated in this direction is to convert the company back to being a private limited company.
Flipkart has apportioned an amount of $400 million to buyback shares from small stakeholders to bring down the number of shareholders to below 50. This is mandatory to file with the appropriate authority in Singapore where the parent firm is registered to obtain the status of a private limited company.
The number stands at around 145 now. Accounting Corporate Regulatory Authority in Singapore is the designated office for these filings. This exercise will facilitate the Walmart acquisition of stakes in Flipkart which is projected to go up to 86%. The formalities to be complied with for a widely held public company would be much more complicated; hence this exercise. None of these have been officially acknowledged by Flipkart or Walmart.
Some of the other details related to the issue include the information that the company is being valued at around $18 to $20 billion for these transactions. The largest stakeholders, SoftBank of Japan and US’ Tiger Global Management may not offload their entire holdings. Among those entities holding smaller stakes in Flipkart are Vanguard Group and T. Rowe Price, investment firms from the US and they hold these in multiple names.
Similarly, the Russian billionaire Yuri Milner and Indian VC firm IDG Ventures have 4 and 2 accounts respectively, in which they have invested. One round of buyback has already happened when SoftBank entered the scene through its mammoth $2.6 billion investment in Flipkart in 2017. The amount spent that time was around $1 billion.
It is also more or less certain that when the deal is completed and the papers are signed, Walmart will have 4 out of 10 directors on the Board of Directors of Flipkart and the co-founders Binny Bansal and Sachin Bansal will also continue on the Board. The CEO Kalyan Krishnamoorthy is also likely to stay on.
Interestingly, reports have emerged that Amazon has made an offer to buy 60% of Flipkart shares for a consideration of $2 billion. This is considered almost the same price that Walmart has offered. It is quite likely that the major stakeholders may go along with the Walmart deal and not accept the offer by Amazon.