After months of prior negotiations, India’s premier ecommerce company Snapdeal has rejected an initial takeover offer from its larger rival Flipkart. However, it has been reported that talks will continue between the two businesses in an attempt to forge a mutually agreeable deal. It is thought that the offer that was rejected was well below the widely anticipated $1 billion valuation.
Snapdeal was started by Indra Mani Shukla and Rohit Bansal in February 2010 and currently has 300,000 sellers with over 30 million products across over 800 categories. Investors in the company include SoftBank Corp, Ru-Net, Alibaba Group and Blackrock. Flipkart is Snapdeal’s larger rival and is an ecommerce company that is headquartered in Bangalore. Founded by Sachin Bansal and Binny Bansal in October 2007, the company is said to be worth over $11.6 billion.
In a report in leading Indian newspaper The Mint, unnamed sources said that Flipkart’s bid was within the region of $700 – $800 million, whilst another leading Indian publication, Economic Times said that the bid was somewhere between $800 – $900 million.
Snapdeal opened its books to Flipkart in my to enable them to run a due diligence process. Japan’s SoftBank, which is the biggest investor in SnapDeal is said to be very keen on a deal being done with Flipkart as it has plans to invest in the larger company at the same time and sell Snapdeal in an all equity deal. This would give them a sizeable stake in India’s largest and most successful ecommece company.
Whilst the initial bid has been rejected, it doesn’t mean that the deal is off and negotiations will continue. However, the differences over the valuation of the struggling Snapdeal will almost certainly delay the process. The offer from Flipkart is thought to be only for Snapdeal’s marketplace business and does not include Snapdeal’s payments arm Freecharge or their logistics business Vulcan, both of which it is reportedly to be selling separately.
The whole process has been hit by several problems and issues with the founders of Snapdeal being initially against the sale only to be brought round by their major investors SoftBank. Then, over the past few weeks, smaller shareholders in Snapdeal including the billionaire Azim Premji of PremjiInvest have expressed their dissatisfaction with any sale and have written to the firm’s board to express their unhappiness.
However, the deal does look like it will go ahead and seems to be a question of ‘when’ and not ‘if’. Negotiations may take a number of months but it is thought that the two camps will come to a compromise at some point soon on the validation of Snapdeal and the acquisition by Flipkart of Snapdeal will go ahead.