Walmart likely to pump in additional United States dollars 3 billion in Flipkart

Walmart likely to pump in additional United States dollars 3 billion in Flipkart

USA retailer Walmart has the option to get additional United States dollars 3 billion investments into Flipkart within a year of completing about USD 16 billion deal and may get India's largest online retailer listed in as early as four years, as per a regulatory filing.

Minority investors holding 60 percent of Flipkart's stocks "acting collectively, may necessitate Flipkart to effect an initial public offering" (IPO) 4 decades after the beginning of their Walmart Flipkart transaction, " the Bentonville, " Arkansas-based retailer said at a May 11 filing with an U.S. Securities and Exchange Commission.

Upon the terms and subject to the conditions set forth in the Share Purchase Agreement, contemporaneously with the closing of the Share Issuance, Walmart will purchase from the Sellers Preference Shares and Ordinary Shares of Flipkart for an aggregate purchase price of approximately $14 billion in cash (the "Secondary Share Purchase", and together with the Share Issuance, the "Transactions").

If Walmart ends up investing an additional $3 billion in Flipkart, its shareholding may increase by an additional 10-12%, according to estimates.

Earlier this week, ET reported that Steuart Walton, grandson of Walmart founder Sam Walton, Judith McKenna, president at Walmart International, and Dirk Van den Berghe, regional CEO of Walmart Canada and Asia, will join the Flipkart board. Also, there will be no termination fee payable by any party if the share issuance agreement or the share purchase agreement were terminated.

Walmart's filing also said it might appoint or replace chief executive officer and other principal executives of the Flipkart group of companies, subject to certain consulting rights of the board and the founder.

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

Elaborating on the deal, Walmart Inc said the Flipkart board will initially have eight directors: five Walmart-appointed, two appointed by certain minority shareholders and one founder. Walmart has already signed an agreement to acquire 77% of Flipart at a behemoth $16 billion for a valuation of $20 billion which is now said as biggest deal in e-commerce world and also largest FDI deal in India. Sachin Bansal has already chose to sell his shares and exit from the company. But two of the directors appointed by the USA retailer would not be affiliated with Walmart for the next two years.

"Shareholders agreement would expire upon the consummation of the IPO, whether initiated by the board or the minority stockholders", it added. "When viewed in tandem with the recently-announced sale of a majority stake in Asda, is indicative of Walmart's long-standing strategy of shifting resources into higher growth potential markets and segments when opportune".

Last week, all significant shareholders in Flipkart like Naspers, venture fund Accel Partners and eBay had confirmed they were selling their shares to Walmart. Sources, however, said SoftBank is yet to take a call on exiting Flipkart.The factors that hold key to the decision include the tax SoftBank has to pay on profits it would earn from such share sale.

These veto rights for the minority shareholders will expire if Walmart owns 85 per cent of the outstanding shares of Flipkart.