Amazon Makes Formal Offer for 60% of Flipkart

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According to a CNBC TV18 report, the US-based e-tailer has made a formal offer to buy a 60% stake in Flipkart on Monday.

With the rival combination of Flipkart and Amazon looking increasingly unlikely, now the world's largest retailer, Walmart Inc., is believed to be in final negotiations to buy a majority stake in Flipkart Ltd. While details are sketchy, it appears that the Amazon bid values Flipkart at close to $20 billion - 66 per cent higher than the valuation in August previous year when the Bangalore-based firm raised $1.2 billion from a technology fund backed by Japan's SoftBank group. Walmart may also buy the stake of the its founders, Sachin Bansal and Binny Bansal. While a competing bid could possibly raise Flipkart's valuation, thereby helping investors, Walmart is learnt to be determined to strike a deal with India's e-commerce poster boy. Furthermore, Flipkart founder Sachin Bansal recently visited the USA to negotiate with Walmart, and the retail giant may return the favour by visiting India soon to close the deal.

The fear is also that if Flipkart was to choose Amazon, it would face scrutiny by the competition watchdog.

Walmart proposed to retain Flipkart's current structure, while Amazon has made not such details known.

This comes just weeks after Walmart announced it was close to an agreement to buy a majority stake in Flipkart by the end of June.

Earlier, Flipkart gave partial exits to investors a year ago through a share buyback after SoftBank invested $2.6 billion in the company in August. Softbank, Flipkart's main stakeholder, however, had some apprehensions over a deal with Amazon. As for why both USA retail giants want a piece of Flipkart, India's e-commerce market is expected to be worth $200 billion annually in the next 10 years. Walmart could pay around $7 billion for a one-third of Flipkart, noted Bloomberg at the time.

The source said on condition of anonymity that a deal could take at least a month to be signed.

Investors expect faster returns from Walmart's investments compared to Amazon, said Yarbrough, a move that limits the brick-and-mortar retailer's ability to spend big on acquisitions in growth markets.

SoftBank founder and chairman Masayoshi Son saw the combined entity of Amazon and Flipkart giving the Japanese group a bigger play in India's burgeoning ecommerce market.

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