Walmart Set to Announce Flipkart Deal Today

Anna Jefferson
May 11, 2018

The blockbuster takeover threatens a major blow to rival Amazon's ambitions in India.

Walmart for its part is promising to provide hundreds of jobs in India, work with kirana owners to modernize their practices, support small businesses, join hands with farmers, and lend a hand to Make in India projects. "It's an extension of the $500-billion Walmart's global expansion strategy". But in groceries, Walmart-owned Flipkart is still a fringe player. The company's stock was already down 13% this year through Tuesday's close.

"It's typical of a business like this that, as you scale up, you will have losses".

Advisory firm Gartner director Adrian Lee said in a statement here: "We expect the status quo to remain within the year after the mega deal".

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S&P lowered Walmart's outlook to negative from stable, citing increasing leverage and risks stemming from the company's spending to expand online and globally as it continues its share buyback program. Walmarts Krish Iyer will be the CEO of the Bengaluru-based firm.

Knowing very well that Flipkart will be loaded with ammunitions post Walmart, the United States retail giant has already pumped in huge capital in its India business.

"We've been looking at this business for some time".

The move fits perfectly with Walmart's worldwide growth plan. SoftBank Group chief executive Masayoshi Son confirmed the deal and he revealed that the deal has been inked on Tuesday night.

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He said SoftBank's $2.5 billion stake in the company would be worth $4 billion with the acquisition. It now operates 20 wholesale clubs in India that serve small businesses. South African internet and entertainment firm Naspers, which had invested United States dollars 616 million in Flipkart in August 2012, sold its entire 11.18 per cent stake in the company to Walmart for USD 2.2 billion. The companies said they're also in talks with other potential investors, which could result in the USA company's stake being lowered, though it will retain majority ownership. Fashion was the only category in which Flipkart maintained a significant edge.

The deal is the largest-ever in e-commerce, according to data compiled by Bloomberg.

"I believe it (the deal) will create a rumble in the industry". Although Flipkart is now the market leader, Amazon's Indian site, which only launched in 2013, is catching up quickly.

Launched in 2007 and envisioned as the Amazon of India before the latter came to India, Flipkart owns countrys largest online fashion retailers - Myntra and Jabong - both of which it had acquired. India is the next big potential prize for global retailers after the United States and China, where foreign retailers have made little progress against Alibaba Group Holding. "Nobody will be better positioned in Asia than we will be". Walmart's deal makes Bansal's success even more important, considering the fact that several analysts had literally written off Flipkart few years back after it ceded substantial market share to Amazon.

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"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 Walmart President and CEO, Doug McMillon. Last month, the company agreed to cede control of its United Kingdom grocery chain, Asda, merging it with British rival J Sainsbury. At that point, Meena wrote that Amazon was closing the gap with Flipkart to become the single-largest online retailer in India in terms of sales.

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