After 3 months-long deliberations that included more than 15 board meetings and a giant payout of at least $210 million, the news is finally here. Japanese internet and telecom giant Softbank has finally made up its mind to merge its biggest Indian asset Snapdeal with India's leading e-commerce giant Flipkart.
The merger is being deemed as India's biggest consolidation in the e-commerce sector and is expected to give a major push to the current cut throat competition going on between Amazon India and India's very own homegrown e-commerce leader, Flipkart. The final deal ended up valuing Snapdeal at around $1 billion, which is a major fall from its $6.5 billion last year, which was the e-commerce firm's peak valuation in its short lived life of seven years.
According to a Business Standard (BS) report, sources close to the companies have informed them that the transaction has already taken place and an official announcement on the merger could be made anytime within the next 3 days.
Snapdeal’s early-stage investor Nexus Venture Partners (NVP) were the reason that the deal took so long to materialise. Nexus had reportedly exercised its veto power against the deal as it wasn't happy with the payout being offered by the Tokyo-headquartered firm. But, finally, this week Thursday, there were some strong whispers coming in that Nexus had finally given in on merging Snapdeal with Flipkart. Interestingly, Nexus decision came through just a day after SoftBank announced that it had recorded a staggering $1.4 billion losses over its investments in Indian-bred Snapdeal and Ola.
Although there's no confirmation yet, but according to the BS report, out of the $210 million amount received as a payout, Nexus has been given around $80 million for its single-digit stake in Snapdeal. The exit amount has been provided to Nexus in a combination of cash and stock in the Flipkart-Snapdeal merged company. The report also states that as per a person aware of the deal, Snapdeal founders Kunal Bahl and Rohit Bansal have not been given any stake in the merged entity.
Though the Snapdeal founders might not have gotten any stake in the merged company, but they surely have a lot to celebrate. According to experts, both Bahl and Bansal, who hold approximately 6.5 per cent together in the company, can be expected to get richer by a whopping $60 million when the merger comes through. According to recent reports, the founder's networth is more than $350 million.
The payout being made by Softbank is being made to all key shareholders of Snapdeal, which includes the two co-founders, and the company's early stage-investors Nexus and Kalaari Capital—both with veto power.
While Kalaari Capital came onboard long ago, it was Nexus which was holding the deal till now. According to reports, while Nexus walked away with around $80 million payout, Kalaari Capital got around $70 million in exit money.
While even though now everyone has given the deal a go-ahead, the term sheet of the deal still needs to be finalised. According to the BS report, a number of tweaks have to be made to the term sheet. In addition to this, there are a lot of legalities involved with a deal of such size. Hence, only when all of this is settled, the deal will progress to the signing stage.
Japan's SoftBank is expected to start its final negotiations with Tiger Global, a significant investor in Flipkart, as soon the Snapdeal side of the transaction is completely tied up.
The merger could take sometime to materialise as Flipkart might be needing at least a months time to complete the due diligence on the deal.
It took SoftBank three long months to get all the Snapdeal board members onboard. The board that includes Misra, Nexus co-founder Naren Gupta, Snapdeal founders, Vani Kola from Kalaari Capital, independent director Akhil Gupta (who’s vice-chairman Bharti Enterprises) and Lydia Bly Jett of SoftBank Group International, was persuaded and convinced by veteran Kabir Misra on Softbank's behalf to sell their stake in the company.
When the board finally agreed on selling Snapdeal, the needle then stopped at valuation. While SoftBank offered a valuation below $1 billion, other board members asked for a valuation of at least $2 billion. But, at the end, they met the midway and the valuation was settled at around $1 billion.
The merger is being deemed as India's biggest consolidation in the e-commerce sector and is expected to give a major push to the current cut throat competition going on between Amazon India and India's very own homegrown e-commerce leader, Flipkart. The final deal ended up valuing Snapdeal at around $1 billion, which is a major fall from its $6.5 billion last year, which was the e-commerce firm's peak valuation in its short lived life of seven years.
According to a Business Standard (BS) report, sources close to the companies have informed them that the transaction has already taken place and an official announcement on the merger could be made anytime within the next 3 days.
Snapdeal’s early-stage investor Nexus Venture Partners (NVP) were the reason that the deal took so long to materialise. Nexus had reportedly exercised its veto power against the deal as it wasn't happy with the payout being offered by the Tokyo-headquartered firm. But, finally, this week Thursday, there were some strong whispers coming in that Nexus had finally given in on merging Snapdeal with Flipkart. Interestingly, Nexus decision came through just a day after SoftBank announced that it had recorded a staggering $1.4 billion losses over its investments in Indian-bred Snapdeal and Ola.
Although there's no confirmation yet, but according to the BS report, out of the $210 million amount received as a payout, Nexus has been given around $80 million for its single-digit stake in Snapdeal. The exit amount has been provided to Nexus in a combination of cash and stock in the Flipkart-Snapdeal merged company. The report also states that as per a person aware of the deal, Snapdeal founders Kunal Bahl and Rohit Bansal have not been given any stake in the merged entity.
Though the Snapdeal founders might not have gotten any stake in the merged company, but they surely have a lot to celebrate. According to experts, both Bahl and Bansal, who hold approximately 6.5 per cent together in the company, can be expected to get richer by a whopping $60 million when the merger comes through. According to recent reports, the founder's networth is more than $350 million.
The payout being made by Softbank is being made to all key shareholders of Snapdeal, which includes the two co-founders, and the company's early stage-investors Nexus and Kalaari Capital—both with veto power.
While Kalaari Capital came onboard long ago, it was Nexus which was holding the deal till now. According to reports, while Nexus walked away with around $80 million payout, Kalaari Capital got around $70 million in exit money.
While even though now everyone has given the deal a go-ahead, the term sheet of the deal still needs to be finalised. According to the BS report, a number of tweaks have to be made to the term sheet. In addition to this, there are a lot of legalities involved with a deal of such size. Hence, only when all of this is settled, the deal will progress to the signing stage.
Japan's SoftBank is expected to start its final negotiations with Tiger Global, a significant investor in Flipkart, as soon the Snapdeal side of the transaction is completely tied up.
The merger could take sometime to materialise as Flipkart might be needing at least a months time to complete the due diligence on the deal.
It took SoftBank three long months to get all the Snapdeal board members onboard. The board that includes Misra, Nexus co-founder Naren Gupta, Snapdeal founders, Vani Kola from Kalaari Capital, independent director Akhil Gupta (who’s vice-chairman Bharti Enterprises) and Lydia Bly Jett of SoftBank Group International, was persuaded and convinced by veteran Kabir Misra on Softbank's behalf to sell their stake in the company.
When the board finally agreed on selling Snapdeal, the needle then stopped at valuation. While SoftBank offered a valuation below $1 billion, other board members asked for a valuation of at least $2 billion. But, at the end, they met the midway and the valuation was settled at around $1 billion.
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