The buyer was United States bricks and mortar retailer Walmart, which on Wednesday announced that it had acquired 77% of Indian e-commerce firm Flipkart for $16 billion, valuing the e-commerce player at over $20 billion. "Flipkart has established itself as a prominent player with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart", said Judith McKenna, president and chief executive officer of Walmart International.
Japans SoftBank Group Corp sold its 20 per cent stake, which it had acquired for Dollars 2.5 billion, for about USD 4 billion. Some, like selling the British Asda stores, were welcomed by Wall Street, but Wednesday's deal got a rude welcome from investors, who raised concerns about Flipkart's steep losses and asked whether Walmart's cash would be better spent elsewhere.
That's how much Walmart is paying for a controlling stake in Flipkart, India's online retailer known for its ubiquitous delivery drivers on motorcycles with oversize backpacks.
Under the pact unveiled Wednesday, Walmart will pay about $16 billion for an initial stake of roughly 77% of Flipkart Private Ltd.
In a $16 billion deal, the USA retail behemoth secured an acquisition of 77 percent in the group's business - the remainder of which will be held by current investors, including Flipkart co-founder and CEO Binny Bansal, Microsoft, Tiger Global and Tencent.
Launched in 2007, Flipkart's two co-founders, Sachin Bansal and Binny Bansal, previously worked for Amazon and both studied computer science engineering at the Indian Institute of Technology in Delhi.
Last week, Flipkart's board agreed to sell up to 75 percent of the company to a Walmart-led group, according to multiple media reports.
Other investors like Naspers and eBay said they sold their holdings in Flipkart.
With Wal-Mart at its back, Flipkart could make the global e-commerce market considerably tougher for Amazon in the long run.
Putting an end to months of negotiations, retail giant Walmart is all set to announce its deal with Flipkart today, where it buys over 70% stake in the homegrown e-tailer. The deal will help the U.S. retail giant -- which has seen consumers migrate to online platforms like those run by Amazon -- get a vantage position in e-commerce space in the world's fastest growing economy which has a huge untapped but rapidly growing market.
"Flipkart will diversify its inventory to attract more Indian consumer segments that haven't started shopping online", said Lee. Therefore, an ironic outcome of this deal is that Indian consumers are going to be subsidised by Walmart's American shareholders even as the U.S. government challenges India at WTO over its subsidies to farmers and exporters.
Any comment from Walmart regarding the Flipkart deal was declined. McMillon is expected to outline its India strategy to Flipkart's employees.
Walmart is an American multinational retailer that operates a chain of hypermarkets, discount department stores, and grocery stores.
"Flipkart lacks the expertise in mom-and-pop stores while Walmart understands retail and "kirana" (small family-run) stores". Bricks and mortar retailers were not threatened and many dismissed e-tailing as a foreign concept saying that Indians want to touch and feel' whatever they buy.
The deal gives Walmart more power over Amazon in its ongoing battle for e-commerce supremacy.
India's online retail market, however, remains largely untapped.