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Snapdeal board rejects $800-$900 million buyout offer from Flipkart


According to two sources aware of the developments, talks between the parties are expected to continue. It is, however, yet unclear if and when Flipkart will come back with a revised formal offer.

The Jasper Infotechboard has rejected an initial offer, estimated at $800-900 million, for its troubled online marketplace Snapdeal, from rival ecommerce company Flipkart, according to people briefed on the matter.

The development comes days after Bengaluru-headquartered Flipkart, the country’s largest online retailer, completed its commercial and legal due diligence of Gurgaon-based Snapdeal, a process that started about eight weeks back.

According to two sources aware of the developments, talks between the parties are expected to continue. It is, however, yet unclear if and when Flipkart will come back with a revised formal offer.

“The due diligence has been clean, with no major red flags raised. Therefore, the price being quoted significantly undervalues the company,” one source told ET. Emails sent to Flipkart and Snapdeal did not elicit a response at the time of going to press.

Flipkart, which had an exclusivity period to make a formal offer till July 3, had appointed global professional services firm EY to conduct the due diligence on its behalf, while Snapdeal had hired Deloitte.

The Tiger Global-backed domestic online retail giant has been the frontrunner to acquire the Kunal Bahl and Rohit Bansal-founded Snapdeal in a deal anticipated at $700 million-1 billion, and which was being steered by SoftBank, the largest stakeholder in Snapdeal.

While the rejection of its initial offer is not expected to draw curtains over the deal, the delay will further add to SoftBank’s ongoing wait for the transaction to close, given that the Japanese investor has been looking to clean up its largely underperforming portfolio in the country.

A SoftBank spokesperson declined comment.

As part of a two-step agreement, SoftBank is expected to invest about $1.5-2 billion in Flipkart, post the closure of the Snapdeal acquisition, which will see the telecom, media and technology-focused investor pick up a substantial stake in the Sachin and Binny Bansal-founded market leader.

MINORITY INVESTORS

A revised offer by Flipkart is also expected to be one that will be more palatable to Snapdeal’s minority investors, a list that includes PremjiInvest -- the personal investment arm of Wipro chairman Azim Premji, Tata Group Chairman Emeritus Ratan Tata, Ontario Teachers’ Pension Plan and BlackRock, among others.

PremjiInvest, which owns a 1.17% stake in the Gurgaon-based online marketplace, having invested about Rs 152 crore in the company, has, on two recent occasions, outlined its concerns over the transaction, seeking greater clarity on the terms at which the beleaguered company is being sold to Flipkart.

Last month, ET had reported that PremjiInvest was also building consensus among other investors, who hold small stakes in Snapdeal, including Singapore’s sovereign wealth fund Temasek and asset manager BlackRock, to potentially oppose special payouts to certain shareholders.

Such payouts are expected to be made to early investors like Nexus Venture Partners and Kalaari Capital, besides company founders Bahl and Bansal. In May, Vani Kola, the managing director of Kalaari Capital, resigned from the board of Snapdeal. Nexus Venture’s Suvir Sujan, Bahl and Bansal still hold seats on the board of the company.

An offer has to be first accepted by the Jasper Infotech board, and then shared with its 20-odd investors, who have to sign off on it.

It is yet unclear if the decision to reject the Flipkart offer was a unanimous one. When contacted by ET, a SoftBank spokesperson declined to comment, while, both, Snapdeal and Flipkart did not respond to emails asking for greater clarity.

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