The Bentonville-headquartered company said earlier this week that it will invest $16 billion in Flipkart for a 77% stake making it Walmart’s biggest ever acquisition and the world’s largest e-commerce deal, valuing the Bengaluru-based and Singapore-registered company at $22 billion.
This includes $14 billion earmarked for purchasing shares from existing shareholders and fresh capital infusion of $2 billion in Flipkart.
If Walmart ends up investing additional $3 billion in Flipkart, it’s shareholding may increase by an additional 10-12%, according to estimates. The right becomes important as Softbank, one of Flipkart’s largest shareholders with a 20% stake, has still not made a final decision to sell its stake because of tax reasons and also sees further valuation upside, as ET reported in its May 11 edition.
The filing also says that there are no termination fees linked with the transaction. A majority of Flipkart’s minority shareholders also have a right to take the company for a public offering four years after the deal is completed and at a valuation higher than what Walmart has paid in this transaction.
This deal has also led to a restructuring of the Flipkart’s board of directors from 10 members to 8 members. As per the filing, the Flipkart board will initially have eight directors, five of which would be appointed by Walmart. But two of the directors appointed by the US retailer would not be affiliated with Walmart for the next two years.
Two directors are expected to be appointed by minority shareholders (which include Tiger Global, Tencent, Microsoft) and one founder (Binny Bansal), who holds a 4-5% stake.
“The number of directors may be increased to nine at any time, appointed by Walmart with the approval of a majority of the Flipkart directors and must be unaffiliated with Walmart,” read the regulatory filing.
Representatives of selling investors like Naspers’s Oliver Rippel and Accel’s Subrata Mitra are expected to step down from Flipkart’s board. Flipkart co-founder and executive chairman Sachin Bansal, who is selling his stake worth $1 billion, will also not be part of the board.
The deal is expected to be closed by FY19, subject to regulatory approval by the Competition Commission of India (CCI) and absence of governmental or shareholder litigation challenging the transaction, among other things, said the filing.
Once the deal closes, Walmart also has the right to appoint or replace Flipkart’s chief executive officer and other key executives in consultation with board and founder, Binny Bansal.
However, for now, Walmart has expressed their enthusiasm about the current leadership of now executive chairman Binny Bansal and Flipkart CEO Kalyan Krishnamurthy and other key executives.