The great Indian-ecommerce merger talks between Flipkart and Snapdeal came to a tragic end this week when the Snapdeal board rejected Flipkart’s second buyout offer of $950 million. People in the sector who were waiting for what would have been the biggest consolidation in the Indian e-commerce sector till date with bated breath for last 3-4 months were left disappointed and dejected.
The fallout between the two ecommerce firms came as a big surprise to many as the deal negotiations were in its last stage. In fact, a meeting was scheduled to take place in Bengaluru on Monday between the two parties to tie up loose ends of the deal. The meeting was eventually cancelled late on Sunday by Snapdeal.
Not only did Snapdeal terminate merger talks with Flipkart, it announced its plans to pursue an independent path for now and called off all strategic discussions as a result. This means, there’s no Infibeam-Snapdeal happening anytime soon also.
The troubled e-commerce player received a total of two offers from the Indian ecommerce leader Flipkart for an all-stake acquisition in July. Snapdeal rejected Flipkart’s initial $850 million buyout offer as Snapdeal’s board felt that the offer made by the ecommerce leader undervalued their company. Flipkart then made a second offer of around $900 million-$950 million.
According to a Reuters report, while the board of Jasper Infotech, which runs Snapdeal, had approved Flipkart’s second offer, the deal was awaiting an approval of smaller shareholders, which never came. Reportedly, the shareholders weren’t happy with the term sheet furnished by Flipkart as it was laced with a lot of ‘hold backs’ and ‘clauses.’
The Flipkart buyout deal had a “number of onerous requirements,” a source said to Business Daily. Further, another thing which acted as a significant deterrent for the deal was that Flipkart was seeking non-compete commitments from Bahl, Bansal and some other Snapdeal investors which was turning out quite difficult for the firm to enforce. In addition to all this, the Bengaluru-headquartered company was keen on getting approval from all Snapdeal shareholders for the deal to be finalised, which was again turning out difficult for Snapdeal.
In addition to Flipkart, Snapdeal had reportedly also received a merger offer from Ahmedabad-based Indian internet and e-commerce conglomerate, Infibeam. Though Infibeam founder and MD Vishal Mehta had denied that any offer has been made but as we know there’s no smoke without fire. According to media reports, Infibeam had even furnished a term sheet for the deal, which had valued Snapdeal at USD 1billion, which was the initial asking price asked for the e-commerce marketplace.
It was revealed that the founders of the cash thirsty ecommerce firm were leaning more towards the Infibeam merger offer as not only was the price good but the term sheet also allowed them to retain their positions even post the acquisition which is something Flipkart wasn’t open to negotiating. But, it seems, FreeCharge sale quenched Snapdeal’s cash thirst and the company decided to give its solo journey another try.
The development comes on the heels of Snapdeal selling its digital payments platform Freecharge to Axis Banks for a whopping Rs 385 crore. Snapdeal founders are confident that the cash inflow from the deal can give Snapdeal the much needed breather it required to survive on its own, at least for a while. In fact, in order to smooth things out for the company and make the capital survive a little longer, the ecommerce firm has decided to lay off close to 80 percent of its workforce. At present, Snapdeal has about 1,200 employees. If the Gurgaon-based firm goes through with its decision, it would be left with about 200 employees only.
Not only has the company dropped its merger plans altogether, its founders Kunal Bahl and Rohit Bansal are now boosting that the company will come out of the troubled reputation it has acquired for last few years and earn a gross profit of whopping Rs 150 crore in next one year (Read Here).
The calling of merger talks between Snapdeal and Flipkart came as a big setback for Japan-based SoftBank Group, the largest investor in Snapdeal, as the firm had been orchestrating the entire deal for several months now and running negotiations between the two parties so as to get itself a significant stake in India’s leading ecommerce firm, Flipkart.
The development also affects homegrown Flipkart, which has been facing stiff competition from global ecommerce giant Amazon in its own country. The ecommerce leader was counting on capital infusion from SoftBank which was reportedly promised by the firm if the Flipkart-Snapdeal deal would have gone through.
Back then, SoftBank’s founder Masayoshi Son claimed that the Flipkart-Snapdeal merger will prove to be a win-win situation for both the homegrown e-commerce players. It was also reported that Son, whose company owns about a third of Snapdeal parent Jasper Infotech Pvt. Ltd. was contemplating infusing another $500 million in Flipkart. The amount would have given Flipkart more fuel to battle it out with Amazon.
However, SoftBank seems to be right behind Snapdeal’s decision to pursue on its own. Commenting on the development, the firm said that it respects Snapdeal’s decision to continue an independent strategy, and looks forward to the results of the Snapdeal 2.0 strategy and to remaining invested in the vibrant Indian e-commerce space.