It’s finally official! Walmart is acquiring Flipkart.
The world’s largest retailer will take control of the Bengaluru-based e-commerce company in its biggest acquisition ever, Softbank chief executive officer Masayoshi Son said in an earnings webcast today, as per Bloomberg.
Softbank’s 20% stake in Flipkart has been valued at about $4 billion (Rs27,000 crore), Son said, adding that he had invested $2.5 billion in the company. Son did not share any further details of the transaction.
“…Walmart is purchasing Flipkart. Last night there was the official announcement…I believe the deal was reached and the money about 2.5 billion that we have invested has turned out to be 4 billion…,” Son said.
The acquisition may cost Walmart around $15 billion, according to a previous estimate by Bloomberg.
Amazon was also reportedly in the fray to acquire Flipkart and went far enough to offer a “breakup fee” of up to $2 billion to prove its seriousness. A breakup fee is a penalty set during the process of takeover agreements to be paid if the target backs out of the deal.
However, Walmart managed to seal the deal, and is now in a position to take the fight to Amazon in India’s e-commerce market, which is estimated to grow over 13 times to $200 billion by 2026.
A giant leap
The deal marks a significant milestone for Flipkart.
What started in 2007 as an online bookstore operating out of the Bansal duo’s two-bedroom apartment in Bengaluru, Flipkart is now the most-valued new-age internet company in the country with around 30,000 employees. It is also one of the highest-funded private companies in the world, which has given a giant like Amazon a tough time in India over the last five years.
An internet business worth billions and backed by marquee investors like Softbank, Tiger Global, DST Global, and Accel Partners, among many others, Flipkart helped break India’s image as just the world’s back office.
Let the battle begin
Following this deal, the Indian e-commerce space will now become a battlefield for two American behemoths: Walmart and Amazon.
The two companies have been fiercely competing against each other in the US, including by acquiring smaller players. Flipkart’s acquisition is widely considered to be an extension of that battle.
“In the US, Walmart is the only formidable competitor left for Amazon. Walmart has been growing its e-commerce operations a lot and Amazon has been increasing its footprint with physical stores,” Kartik Hosanagar, a professor of technology and digital business at the University of Pennsylvania’s Wharton School, told Quartz last week.
“Walmart’s looming investment in Flipkart reflects that. Walmart is fighting Amazon and Alibaba in China through its partnership with JD. I suspect something similar will happen in India through a partnership with Flipkart,” he added.