Walmart signed an agreement to become the largest shareholder in Flipkart Group in a transaction valued at approximately $16 billion.
Subject to regulatory approval in India, Walmart will pay approximately $16 billion for an initial stake of approximately 77% in Flipkart. The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft.
To finance the investment, Walmart intends to use a combination of newly issued debt and cash on hand. Upon closing, Flipkart’s financials will be reported as part of Walmart’s International business segment.
Several financial firms, including JPMorgan Chase and Barclays, are providing $5 billion in financing to Walmart in what could be one of the largest revolving credit facilities of recent times. The facility amounts to about a third of the total acquisition cost and will have a tenure of 18 months. It is secured against the balance sheet of Flipkart and its shares. The credit line is priced about 300-400 basis points above LIBOR.
Walmart’s investment includes $2 billion of new equity funding, which will help Flipkart accelerate growth in the future. Walmart and Flipkart are also in discussions with additional potential investors who may join the round, which could result in Walmart’s investment stake moving lower after the transaction is complete. Even so, the company would retain clear majority ownership. Closing is expected later this calendar year, subject to regulatory approval.
While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future.
“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” said Doug McMillon, Walmart’s president and CEO. “As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market.”
Founded in 2007, Flipkart has emerged as a leader in India’s electronics, large appliances, mobile and fashion and apparel. Flipkart’s supply chain arm, eKart, serves more than 800 cities, making 500,000 deliveries daily.
While Walmart and Flipkart will leverage the combined strengths of both companies, they will maintain distinct brands and operating structures. Currently, Walmart India operates 21 Best Price cash-and-carry stores and one fulfillment center in 19 cities across nine states in India, with more than 95% of sourcing coming from India.
J.P. Morgan Securities acted as the lead financial advisor for Walmart, along with Barclays, with Hogan Lovells, Shardul Amarchand Mangaldas and Gibson, Dunn & Crutcher acting as outside counsel. Goldman Sachs acted as exclusive financial advisor to Flipkart. Gunderson Dettmer, Khaitan, Allen & Gledhill and Dentons Rodyk & Davidson provided legal counsel to Flipkart.
