Walmart May Launch Flipkart IPO In As Early As 4 years

14 May, 2018, 04:31 | Author: Becky Perry
  • The logo of Walmart is seen on shopping trolleys at their store in Sao Paulo Brazil

Else, it could opt to walk out of the agreement without inviting any penalties.

On Saturday, Walmart Inc (WMT.N) said in a filing with a US regulator that it may India's online store, Flipkart public in as early as four years, detailing for the first time a potential listing timeline for Walmart's largest-ever acquisition. The resulting entity would be a publicly-listed, majority-owned subsidiary of Walmart, it said.

"Immediately after the closing of the transactions, all Flipkart preference shares will convert into ordinary shares", Walmart said. Also, there will be no termination fee payable by any party if the share issuance agreement or the share purchase agreement were terminated.

"The share issuance agreement and the share purchase agreement also contain customary termination rights for the parties including, among others, by the Purchaser (Walmart) if the transactions have not closed by March 9, 2019".

This would be done at a valuation no less than that paid by Walmart under the share issuance agreement.

The deal now awaits clearance from India's anti-trust regulator and is expected to close later this year.

The logo of Flipkart is seen on the company's office in Bengaluru. Walmart had reported an EPS of $3.28 in Fiscal 2018.

As per SEC filing, Walmart may take Flipkart public in four years. 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.

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Flipkart board will initially have eight directors: five Walmart-appointed, two appointed by certain minority shareholders and one founder. Sachin Bansal has already made a decision to sell his shares and exit from the company. The USD 500 billion retail titan has disclosed in a US SEC filing that it might take Flipkart public in as early as four years. Of the five directors Walmart can appoint to Flipkart's board, two must be unaffiliated to the Bentonville, Arkansas-based company.

It also said it could appoint or replace Flipkart's chief executive and other key executives of group companies in consultation with Bansal and the board. This suggests that minority shareholders, with a combined stake of 13.8 per cent of the overall equity of Flipkart, may be able to block some transactions.

The remaining positions will be taken up by Flipkart founder Binny Bansal and two remaining directors to be appointed by certain minority shareholders. Post which the U.S. retailer's shareholding is likely to cross 85%.

Last week, all significant shareholders in Flipkart like Naspers, venture fund Accel Partners and eBay had confirmed they were selling their shares to Walmart. These rights will, however, expire if Walmart increases its stake to 85% or more, the retail giant noted in the filing.

If Walmart transfers a sufficient number of Flipkart shares which gives rise to a situation that it no longer controls a majority of the Flipkart shares, then each minority shareholder will also be entitled to transfer all of its holding to the proposed buyer of Walmart's holding.

In case, SoftBank decides not to sell, Walmart would be left with about 55 per cent of Flipkart.

For Walmart, the acquisition opens a new front in its battle with Amazon, which had expressed interest in making a competing offer for a stake.

Walmart, while signing the deal, stated that the remainder of the business will be held by some of Flipkart's existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp.


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