Infibeam has reportedly put in a term sheet, which is likely to value Snapdeal at $1 billion.

Infibeam in talks with Snapdeal for a possible merger to create a 2-billion entity
Atom M&A Friday, July 14, 2017 - 11:01

While Flipkart and Snapdeal negotiate over valuation, there seems to be a new buyer in the fray to buy beleaguered ecommerce player Snapdeal. According to a report in the Economic Times, Infibeam, India’s only listed ecommerce firm is in talks with Snapdeal for a possible merger.

At a time when Snapdeal's board rejected a $700-750 million offer for sale to Flipkart last week and a revised offer of around $900-950 million is on the anvil, Infibeam has reportedly put in a term sheet, which is likely to value Snapdeal at $1 billion.

A term sheet is a non-binding agreement that puts together the terms and conditions under which an investment will be made.

ET reports that Ahmedabad-based Infibeam, which has a market capitalization of around Rs 6,100 crore will create a combined entity of $2 billion post the merger with Snapdeal.

Like the deal with Flipkart, the merger with Infibeam will only include Snapdeal’s online marketplace and not Vulcan Express and Freecharge.

“While Infibeam has a focus on business-to-business commerce, Snapdeal's is a consumer-led online retail platform which is why this merger may bring in synergies in their operations. While Infibeam has given a term sheet, it's not the end of the road for Flipkart,” a source told ET.

The advantage of the merger would be that both companies can cross-sell their products are their merchants are largely different.

According to the report, Snapdeal has three options right now. First would be to close a deal with Flipkart, second to merge with Infibeam or to sell Freecharge and Vulcan Express and use those funds to stay independent.

Snapdeal’s largest shareholder SoftBank has been trying to sell off Snapdeal for the past two months. After finalizing on Flipkart as the potential buyer, the deal has seen a number of hurdles.

It started with early investors, the next biggest shareholders of Snapdeal, Kalaari Capital and Nexus Venture Partners opposing the sale. Several negotiations later, Softbank succeeded in bringing them on board.

And while due diligence was underway, one of Snapdeal’s smaller investors PremjiInvest - Azim Premji’s investment firm – wrote to the board expressing its dissent over the proposed sale, especially to do with the amount being paid to the founders and other shareholders.

After overcoming all of this, Snapdeal last week rejected Flipkart’s $700-750 million buyout offer as it was expecting at least $1 billion.

In the case of merger with Infibeam, the listed company will have to get shareholder nod to seal the deal. One of the sources told ET that this will pave way for a clear exit for shareholders in Snapdeal, as it will be merged with a public company.

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