Flipkart Sold 77% Stake to Walmart for $16 Billion

Flipkart Sold 77% Stake to Walmart for $16 Billion

Walmart Inc believes that it won't make any "material difference" to its plans for Flipkart even if Japanese firm Soft-Bank finally decides against selling its stake in the Indian company as the Bentonville-based giant will still enjoy a comfortable majority in the Indian company's shareholding, a person familiar with USA retailer's plans said. "Walmart should not have any issue with that".

South African internet and entertainment firm Naspers, which had invested $616 million in Flipkart in August 2012, sold its entire 11.18 percent stake in the company to Walmart for $2.2 billion. eBay said it is selling its stake in Flipkart for about $1.1 billion.

In the Walmart-Flipkart deal, the revenue department will go through the share purchase agreement to ascertain the objective of investment and the emanating gains.

"Walmart wants to make sure that a higher price is not asked for at a later date by SoftBank", a person related to the deal said.

When contacted, a SoftBank spokesperson declined to comment.

SoftBank is undecided on selling its Flipkart shares because of tax implications and also because it sees a further increase in valuation for Flipkart.

"Last night, (they) reached a final agreement and it was decided that Flipkart will be sold to America's Walmart", Son had stated in Tokyo, according to an AFP report.

However, if SoftBank decides to stay invested in the Bengaluru-based company, it will help bring checks and balances. It also said it supported Flipkart's ambition to go public. As per the definitive agreement between the companies last week, Walmart will acquire about 77 per cent stake in the Singapore entity for United States dollars 16 billion. "Walmart will have the majority with or without SoftBank". This investment will be made by Walmart purchasing new shares of Flipkart at the same price as the acquisition transaction. "Walmart may appoint or replace the chief executive officer and other principal executives of the Flipkart group of companies, subject to certain consultation rights of the board and the founder", the SEC filing said.

Walmart has other options up its sleeves.

"In the Walmart-Flipkart deal, Section 9 (1) will apply as the assets of Flipkart Singapore are substantially based in India and hence the sellers would be liable to pay capital gains tax", Titus & Co Managing Partner Diljeet Titus opined. "Walmart could raise its shareholding by an additional 10-12%". Post this round, SoftBank is slated to have a controlling stake.

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