Snapdeal accepts Flipkart $950 million buyout offer; Axis to acquire Freecharge

Editor | Sep 15, 2020

Do you remember how Flipkart hiked its Snapdeal buyout offer last week to $900-950 million after the first offer was rejected? Word is out that the Snapdeal board has approved the offer! After 4 long months (news about the talks started in March) and various rounds of negotiations, Snapdeal’s co-founders and main investors have finally reached an agreement and ended impasse.

According to people close to the development, the Jasper Infotech board that includes co-founders Kunal Bahl and Rohit Bansal and early-stage investors Nexus Venture Partners and Kalaari Capital have accepted Flipkart’s offer. Looks like Infibeam is out of the running.

The negotiations between Flipkart and Snapdeal on the final sale & purchase agreement would start on coming Monday.

Snapdeal seek shareholders’ views

There’s always a ‘but’, isn’t it?

While the board members have given their nod, Snapdeal is seeking its other shareholders’ opinion on the deal. The home-grown etailer has over 25 institutional shareholders like Premji Invest, Ontario Teacher’s Pension Fund and several individual investors.

The deal is almost through but the Board wants to seek views and comments from shareholders. Also, the Board is not unanimous in its opinion, so all the investors will be asked for feedback,” disclosed an insider.

Snapdeal decided to arrange shareholders meeting to address concerns regarding the payouts. In the month of May and June, Premji Invest has asked for clarity over sale to Flipkart.  

A source revealed,

“The discussion to allow all the stakeholders to have a say on the issue had been going on since the last few days. It came to light after the minority stakeholders started questioning the payouts promised to the majority stakeholders.”

No cash payout, only stock-swap

According to news reports, the bone of contention is that Premji doesn’t want to sell its stake and exit. Instead, the minority shareholder wants stake in Flipkart. But Flipkart board is in no mood to increase the number of shareholders. The Bansals-led company only want Softbank as its shareholder, not the minority shareholders, early-stage investors and co-founders. This is to ensure that Flipkart’s future strategic decisions face no delay due to number of stakeholders.

“The deal would go through with or without PremjiInvest’s agreement as Tiger Global and SoftBank have been working very closely on this. SoftBank has managed to get the consent of 75% of Snapdeal shareholders,” shared a source.

Flipkart alters term sheet to include ‘liability’ clause

Another important development in this regard is that Flipkart has revised the term sheet to include a clause about legal liability of Snapdeal post-merger. As per the altered term sheet, Flipkart wants Snapdeal’s stakeholders to remain legally liable for at least a year and a half or 2 years after the merger. Another clause is that Flipkart would pay $150-200 million of the sale price to Snapdeal only after a pre-decided period elapses post-merger.

These new clauses are also one of the reasons why Snapdeal board has called a shareholders’ meeting.

Freecharge ready to be acquired by Axis Bank

Besides Snapdeal, Freecharge and Vulcan Express are up for grabs as well.

Snapdeal’s digital wallet company Freecharge’s potential buyers list was long. But we have a potential winner (buyer). Axis Bank is all set to acquire the payments firm. Sources close to the development have revealed that the formal announcement would be made this week.

The private sector bank has valued FreeCharge at Rs 385 – 390 crore. Snapdeal had bought Freecharge at a value of Rs. 2,500 crore back in April 2015.

The final details would be out as soon as the official announcement is made. Now Snapdeal’s logistics arm Vulcan Express is waiting for its buyer.

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