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Snapdeal’s two co-founders want the ecommerce marketplace to go forward as a smaller, but independent entity - Snapdeal 2.0.

Flipkart-Snapdeal merger in trouble as Snapdeal founders back out of sale
Atom M&A Monday, July 31, 2017 - 10:09

The Flipkart-Snapdeal deal, which would have created the country’s largest ecommerce player may not see the light of the day.

According to a report in the Economic Times, there was a meeting to be held to settle the merger over Monday and Tuesday in Bengaluru which has been called off.

And this is because Snapdeal’s cofounders Kunal Bahl and Rohit Bansal now refuse to back the sale to Flipkart.

"The two co-founders have said they will vote in favour of Snapdeal going forward as a smaller, but independent entity, terming it 'Snapdeal 2.0'," said a source told ET.

ET reports that law firm J Sagar Associates and banker Credit Suisse, which are representing Snapdeal in the negotiations, were to meet with Khaitan & Co and Goldman Sachs, who are representing Flipkart in a bid to close the transaction.

This meeting has been cancelled. A call between key stakeholders was expected to happen on Sunday night and a public announcement on the fate of the deal is likely on Monday.

Over the past six months, the sale of beleaguered Snapdeal to Flipkart has been facing roadblock after roadblock.

Earlier this month, listed ecommerce company also approached Snapdeal for a potential merger. While the cofounders of Snapdeal were reportedly in favour of this deal over the one with Flipkart, sources tell ET that a merger between Infibeam and Snapdeal is highly unlikely.

As per the terms of the bid put in by Flipkart, it has asked for 100% approval from Snapdeal stakeholders before going ahead. It has also included several indemnity-related clauses in the agreement.

After its initial offer of around $700 million was rejected by Snapdeal’s board, it made a second offer of about $850 million two weeks later.

Before that, PRemji Invest, one of the smaller stakeholders in Snapdeal objected to the deal over its structure and the special payout of an approximate $90 million to the second largest investors Kalaari Capital and Nexus Venture Partners.

Snapdeal, which was also looking to sell its payments arm FreeCharge, successfully sold it to Axis Bank for Rs 385 crore last week.

It seems like with this money in hand, Snapdeal founders want to retain control over the ecommerce marketplace.

In fact, Kunal Bahl called it a great outcome and wrote to his employees saying, ‘"We have an opportunity of a lifetime here, and we must seize it and make the most of it.”

It seems like Kunal and Rohit want to use funds from the sale of FreeCharge and its logistics arm Vulcan Express – which it wants to sell for Rs 100-120 crore – to run Snapdeal independently. 

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