U.S. retail giant Walmart has an option to invest an additional $3 billion in India's largest online retailer Flipkart at the same valuation within a year of completing the acquisition of 77% stake in the company, according to the company's regulatory filings with the USA market regulator, the Securities and Exchange Commission.
Mumbai: Walmart, which signed definitive agreements last Wednesday to acquire a 77 per cent stake in e-commerce giant Flipkart for $16 billion, has set a one-year deadline for securing all regulatory approvals.
Minority investors holding 60% of Flipkart's shares "may effect an IPO" four years after the close of the transaction, Walmart said in the filing to the US Securities and Exchange Commission.
The IPO ought to be done no more a appraisal than that at which wal mart spent from the Indian ecommerce firm, " the filing explained. Walmart announced earlier this week that it will pay $16 billion for a roughly 77% stake in Flipkart in what is the United States retail giant's largest-ever deal and a move to take on arch rival Amazon.com Inc.in a key growth market.
Walmart said it may elect to ask Flipkart to issue shares worth Dollars 3 billion within a year of close of transaction but did not clearly say if the investment would be brought in by it or a new partner.
A statement issued by Walmart that day identified Flipkart co-founder Binny Bansal, Tencent Holdings Ltd, Tiger Global Management LLC and Microsoft Corp as the investors who would hold the remaining 23 per cent, implying SoftBank had agreed to sell its 20-22 per cent stake.
The bargain today awaits clearance out of India's anti trust regulator and is predicted to close later this year.
Walmart or its components could question Flipkart to issue new common shares of up to 3 billion until the closing of their "transactions and before or on the very first anniversary of their final", it also said. This is the first sale after the acquisition of Flipkart by Walmart.
Walmart also mentioned no celebration would be responsible to pay a termination fee if a share issuance or invest in arrangement with Flipkart were also terminated. However, two board appointees of Walmart will be independent members, the filing noted. Softbank acquired a 20 percent stake for $2.5 billion (about Rs. 16,800 crores) in Flipkart through its Vision Fund past year, and the exit will give it $4 billion (approximately Rs. 27,000 crores).
Though with time Walmart will appoint six directors with the consultation of all the majority Flipkart directors now it has been made clear in the deal that Walmart will initially appoint five directors to Flipkart's board, two directors will be named by minority shareholders while Bansal will take one board seat.
Previous Amazon workers Sachin and also Binny Bansal based Flipkart at 2007 and, only such as Amazon, started by attempting to sell novels.