Walmart can make a $3 billion top-up in Flipkart at same valuation

Walmart can make a $3 billion top-up in Flipkart at same valuation

Walmart announced earlier this week that it will pay $16 billion for a roughly 77 percent stake in Flipkart in what is the US retail giant's largest-ever deal and to beat the foremost rival Amazon.com Inc (AMZN.O) in a key growth market. The $500 billion firm added that the IPO will be not be less than the valuation at which Walmart acquired the company.

This would be done at a valuation no less than that paid by Walmart under the share issuance agreement.

The bargain today awaits clearance out of India's anti trust regulator and is predicted to close later this year.

At any time after the closing of the transactions and on or before the first anniversary of the closing, the purchaser, or any of its affiliates, may request that Flipkart issue additional ordinary shares with an aggregate purchase price of up to United States dollars 3 billion, it said.

Two directors are expected to be appointed by minority shareholders (which include Tiger Global, Tencent and Microsoft) and one by cofounder (Binny Bansal), who holds a 4-5% stake. The deal's terms give investors controlling as little as 14 percent of Flipkart's shares the right to require Walmart to take the Indian company public in as soon as four years, according to the filing. For at least two years following closing of the transactions, two of the Walmart-appointed directors won't be affiliated with Walmart.

Walmart said, "The Share Issuance Agreement and Share Purchase Agreement also contain customary termination rights for the parties, including, among others, by the Purchaser if the Transactions have not closed by March 9, 2019".

The logo of Flipkart is seen on the company's office in Bengaluru.

It also said it could appoint or replace Flipkart's chief executive and other key executives of group companies in consultation with Bansal and the board.

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This deal has also led to a restructuring of the Flipkart's board of directors from 10 members to eight.

Walmart also provided some clarity on its plans to come out with an initial public offering (IPO) for Flipkart.

The Flipkart board will initially have 8 directors, as per the filing.

The minority shareholders of Flipkart will be able to exercise a conditional right of veto over "specified decisions relating to Flipkart's business and activities", the filing said but did not spell out the details.

"Shareholders agreement would expire upon the consummation of the IPO, whether initiated by the board or the minority stockholders", it added.

Following the acquisition, all significant stakeholders in the Indian online retail giant like Naspers, venture fund Accel Partners and eBay had confirmed they were selling their stocks to Walmart. The right of first refusal for the Minority Shareholders will expire if Walmart owns 85% of the outstanding shares of Flipkart.

Reuters had previously reported that Bansal and SoftBank would sell their entire stakes in Flipkart. Walmart will still hold a 42% stake in the company, but this marks a retreat from the United Kingdom market in the face of fierce competition from Tesco, Morrisons, Aldi and Lidl.

The Economic Times newspaper reported on Friday, citing unnamed sources, that Japan's SoftBank Group, which owns a roughly 20 percent stake in Flipkart, was rethinking its exit due to tax liabilities and because it saw further value in Flipkart.

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