SoftBank may be orchestrating Snapdeal's merger with Flipkart, says report
The broad contours have been agreed upon by Flipkart, SoftBank, Snapdeal and others
SoftBank, the Japanese telecom major, may be orchestrating Snapdeal's merger with Flipkart, according to a report in The Times of India on Tuesday citing sources.
SoftBank is likely to pick up about 15 percent stake in the merged entity for $1.5 billion, the report said, adding it has about 30 percent stake in Snapdeal, which is in trouble due to high cash burn and low profitability.
The deal is also likely to involve $1 billion share sale by Tiger Global, the largest investor in Flipkart, said the report.
Last week, the Mint newspaper had reported that Kunal Bahl-promoted e-commerce company is in talks with Flipkart and Paytm for a potential sale. The report also said SoftBank is leading the talks and that it is likely to invest $50 million as bridge money in Snapdeal until the deal is done.
However, Snapdeal spokesperson denied any such move to the newspaper. "Your information is incorrect and without basis. We are making decisive progress in our journey towards profitability and all our efforts are aligned in this direction," the spokesperson told the Mint.
The report in The Times of India on Tuesday says that the negotiations for such a deal is indeed on and that the broad contours have been agreed upon by the companies.
"SoftBank and Flipkart have agreed on the broad contours of the deal. If these terms stay on track, it's likely that the talks will culminate into a definitive transaction by late April," a source has been quoted as saying in the report.
A deal will result in Tiger Global selling 10 percent of its 30 percent stake in Flipkart and this will bring back entire amount the investor had pumped into the e-commerce major, with 20 percent stake still retaining, the report said.
The deal, if it happens, will be the biggest consolidation in the bleeding Indian e-commerce sector. The sector, which is one of the world's fastest growing internet services market, has largely been driven by steep discounts, resulting in investor markdowns due to concerns about profitability.
In a bid to turn a profit in the intensely competitive market, which is dominated by homegrown Flipkart and US Internet giant Amazon, Snapdeal said last month that it would lay off 600 employees and its founders would forego their salaries.
Snapdeal reported a loss of Rs 2,960 crores in the financial year to 31 March 2016, according to regulatory filings.
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