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Walmart may take Flipkart public in as early as 4 years
15 May 2018, 04:20 | Lionel James
Walmart Beats Amazon To $16 Billion Flipkart Deal, Brings E-Commerce Battle To India
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 United States market regulator, the Securities and Exchange Commission.
Minority shareholders holding 60% of Flipkart's shares "acting together, may require Flipkart to effect an initial public offering following the fourth anniversary of the closing of the transactions", said the retailer.
At any time after the closing of the transactions and on or before the first anniversary of the closing, the purchaser, or any of its affiliates, may request that Flipkart issue additional ordinary shares with an aggregate purchase price of up to United States dollars 3 billion, it said.
Walmart said on Wednesday it and Flipkart were in talks with other investors to potentially take part in a funding round. With regard to the board composition, for now it will have eight directors down from ten-out of which five will be appointed by Walmart; while two will be representatives of minority shareholders Tiger Global and Chinese internet major Tencent, along with Binny Bansal.
There are several situations under which the agreement can be terminated: the failure to win regulatory approval from the Competition Commission of India; material adverse change in Flipkart's business; inaccuracy of representations and warranties, and performance of covenants; and governmental or shareholder litigation challenging either of the share issuance or secondary share purchase transactions.
The filing also says that there are no termination fees linked with the transaction.
Walmart also provided some clarity on its plans to come out with an initial public offering (IPO) for Flipkart.
SoftBank had invested United States dollars 2.5 billion in Flipkart and exiting the company would fetch it up to USD 4.5 billion.
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.
Even it would appoint or replace Flipkart's chief executive and other key executives of group companies after consulting Bansal and the board.
For at least two years after the transactions, two of the Walmart-appointed directors will be unaffiliated with Walmart.
Last week, all significant shareholders in Flipkart like Naspers, venture fund Accel Partners and eBay had confirmed they were selling their shares to Walmart.
The right of first refusal for the minority shareholders will expire if Walmart owns 85 per cent of the outstanding shares of Flipkart, it added. The number of directors may be increased to nine at any time, the filing mentioned. Under the deal, SoftBank Group will sell the entire 20% stake it holds in Flipkart through an investment fund, less than a year after the Japanese conglomerate invested $2.5 billion in the e-Commerce giant.
In case, SoftBank decides not to sell, Walmart would be left with about 55 per cent of Flipkart.
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