Walmart and Flipkart Deal Confirmed for $16 Billion

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By Published On: May 10, 20180 Comments

After months of talks and speculation, Walmart has confirmed that it has made a deal with Indian e-commerce giant, Flipkart, to acquire a 77 percent stake in the company.

Walmart has finalised a deal with Flipkart to purchase a majority stake in the business for $16 billion. In a recent statement, the US retailer said its initial stake in the online marketplace would be approximately 77 percent, and that the remainder of the business would remain in the hands of existing investors, including the e-commerce platform’s co-founder, Binny Bansal, Tencent, Tiger Global, and Microsoft.

According to Walmart’s President and Chief Executive, Doug McMillon, the company’s investment in Flipkart is part of Walmart’s overall goal of investing in India’s fast-growing e-commerce market.

“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 e-commerce in the market,” said McMillon.

Included in the Flipkart and Walmart deal is $2 billion of fresh equity funding, with the deal being financed by a combination of newly issued debt and cash. According to Walmart, the two companies are also looking at enlisting other investors to assist with funding, which could reduce Walmart’s stake in Flipkart in the long-term.

SoftBank, one of Flipkart’s largest shareholders, is also rumoured to be selling its stake in the company as part of the deal, but whether or not the Japanese tech giant will part with its shares is yet to be confirmed.

The deal comes at a pivotal time for Walmart, after the company reported an earnings miss in February as the retailer struggles to keep up with the likes of Amazon, in an increasingly online retail environment.

Walmart’s investment in Flipkart will allow the business to compete directly with Amazon, after the company’s CEO, Jeff Bezos announced he would be investing $3 billion towards India’s e-commerce industry back in 2016. Amazon is currently reported as the second biggest e-commerce player in India, second to Flipkart.

In early April, sources close to Flipkart told the New York Times that Walmart and Amazon had both made offers to purchase a controlling stake in the Indian company. However,  shareholders were allegedly viewing Walmart’s deal more favourably because Amazon is a direct competitor to Flipkart, and the company was hesitant to make Amazon privy to confidential company information.

The deal between Walmart and Flipkart is expected to finalise later this year, and both companies have said they will continue to operate as two distinct brands.

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