E-commerce giant Flipkart has reportedly bought back shares worth $350 million from investors in its Singapore-based parent to regain private limited status in the country. This move comes amid speculations of a possible acquisition of the company by US retail major Walmart. This development was first reported by Paper.vc which sourced regulatory filings made by Flipkart in Singapore, the company has paid a set of investors — including T Rowe Price and Valic — about $350 million to purchase 18,95,574 preference shares. The transaction, which closed on April 27, pegs Flipkart’s valuation at around $17.7 billion.
Among other investors who sold their shares in this exercise were Shekhar Kirani, Deep Nishar, and IDG Ventures. Apart from these investors, several pension funds exited Flipkart through the buyback at $169.31 per share. The company’s largest backers like New York-based Tiger Global, Japan’s SoftBank, Accel Partners, Microsoft, South African media and internet group Naspers, and eBay did not participate in the buyback. These investors, are reportedly expected to fully or partially sell their shares in Flipkart as Walmart makes its acquisition bid for the company.
Eases regulatory challenges
In 2014, Flipkart had applied to Singapore’s registrar and regulator, where it is incorporated, for conversion into a public company as it was a mandatory procedure for entities with more than 50 shareholders. But the company now needed to become a private entity in Singapore to avoid major regulatory burden in the case of a major transaction like the rumoured acquisition by Walmart. Times of India reports that Walmart is expected to invest $8-10 billion in Flipkart as its US rivalry with Amazon will travel to India.
Amazon swoops in?
Several outlets reported earlier this week that Amazon, Flipkart’s primary competitor, had put in a bid matching that of Walmart to pick up a controlling stake in the company. Reports suggested that Amazon’s deal included a $2-billion breakaway fee in case the deal did not go through because investors and Flipkart co-founders are worried that the deal will run into regulatory hurdles.
While Walmart is reported to be in pole position for acquiring a majority stake in the company, the counter-bid could further stall the deal, which was supposed to be closed last month. Business Standard reported that Walmart was supposed to sign the term sheet for the deal almost three weeks ago, but did not because SoftBank wanted Flipkart to wait until Amazon had put in its bid.