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Snapdeal board rejects Flipkart’s $700-750 million buyout offer

LiveMint logoLiveMint 04-07-2017 Mihir Dalal

Bengaluru: The board of struggling online marketplace Snapdeal has rejected an offer of roughly $700-800 million from larger rival Flipkart, creating a new hurdle in a proposed deal that has attracted criticism from some Snapdeal shareholders, three people familiar with the matter said.

After completing due diligence on Snapdeal (Jasper Infotech Pvt. Ltd), Flipkart made the new offer late last week, the people cited above said. That offer, which is significantly lower than Flipkart’s opening bid of roughly $1 billion, has been rejected by Snapdeal, they said on condition of anonymity.

The deal isn’t off and negotiations will continue but the differences over Snapdeal’s valuation will delay the process, the people said. Flipkart’s offer is only for Snapdeal’s marketplace business; it doesn’t include Snapdeal’s payments arm Freecharge and its logistics business Vulcan, both of which are being sold separately, the people said.

The final price, and the fate of Snapdeal sale to Flipkart, now depends on negotiations between SoftBank Group and Tiger Global Management, the two largest shareholders in Snapdeal and Flipkart respectively, the people said. Apart from the proposed Snapdeal sale to Flipkart, SoftBank is separately in talks to invest in Flipkart and buy part of Tiger Global’s stake in the online retailer.

Flipkart and Snapdeal didn’t immediately respond to emails seeking comment.

The deal has hit hurdles right from the start. SoftBank has been pushing for a sale since March after Snapdeal lost out in the e-commerce war to Flipkart and Amazon India. Snapdeal co-founders Kunal Bahl and Rohit Bansal as well as two key Snapdeal shareholders, Kalaari Capital and Nexus Venture Partners, were initially opposed to a sale but SoftBank brought them around to pursuing the deal with Flipkart in May. Bahl, Bansal, Kalaari and Nexus are expected to receive cash payouts as part of the proposed deal.

Then, there were other problems. Over the past few weeks, smaller shareholders in Snapdeal, including billionaire Azim Premji’s investment firm PremjiInvest, have written to the firm’s board, expressing unhappiness over the proposed sale.

If the deal goes through, it will be both the biggest-ever in India’s start-up business and the biggest distress sale. Ironically, the largest deal currently is Snapdeal’s $400 million purchase of Freecharge in April 2015. Paytm is now in talks to buy Freecharge for just $40-50 million, Mint reported on 11 May.

Snapdeal, which has raised nearly $2 billion in cash, hit a peak valuation of $6.5 billion in February 2016 when it received $50 million from investors.

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