Flipkart goes private in Singapore ahead of Walmart deal

Buys back shares worth $350 million at a valuation of $17.69 billion

In a move seen as a precursor to US retail giant Walmart acquiring a majority stake in Flipkart, the Indian e-commerce player has bought back shares worth $350 million from investors in its Singapore-based parent to regain private limited status in the country.

Flipkart bought 1,895,574 redeemable preference shares and 174,319 non-redeemable preference shares from investors for $350.46 million, according to documents the Bengaluru-based company filed with the Singapore authorities and sourced by business intelligence platform Paper.vc. The transaction was closed on April 27.

Among the 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. Other large investors in the company — SoftBank, Tiger Global, Naspers, Microsoft, eBay, and Accel — did not participate in the buyback. 

IDG Ventures had invested in the company through multiple funds.

Flipkart needed to become a private entity in Singapore to avoid excessive compliance in the case of a major transaction like the one being planned with Walmart. The US retail giant is said to be investing around $12 billion to pick up 60-80 per cent in Flipkart at a primary valuation of $20 billion.
 

In a resolution Flipkart filed with the Singapore authorities, the company said it would look to acquire its own shares from investors at $131.4 per share. Taking this as the base price per share and multiplying it with the number of shares in Flipkart, which stands at around 134.6 million, one can arrive at an estimated valuation of $17.69 billion.

This could likely be the secondary valuation at which Walmart will invest in Flipkart. It is expected that the primary valuation will be closer to $20 billion. 

Tiger Global, Naspers, Accel Partners, IDG Ventures and a few other investors are likely to sell their stakes to Walmart in the transaction. SoftBank might retain part of its stake in the company.

Business Standard reported on Thursday that Flipkart’s chief rival, Amazon, had put in a bid matching that of Walmart to pick up a controlling stake in the Indian firm. Sources said Amazon’s deal included a $2-billion breakaway fee in case the deal did not go through because investors and Flipkart cofounders are worried that the deal will run into regulatory hurdles.

While Walmart is understood to be in pole position for acquiring a majority stake, the counter bid could further stall the deal, which was supposed to be decided last month. Sources close to the newspaper said 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.

In December last year, Flipkart Ltd, the Singaporebased parent entity of the Indian e-commerce giant, had bought back shares worth close to $800 million from investors including Tiger Global, Accel Partners, and DST Global.

The buyback was part of Japanese investment giant SoftBank’s $2.5-billion investment in the company, and that included a large secondary component