Amazon just offered to buy a 60% stake in India's Flipkart

The deal was expected to be completed by the end of June for $10 billion to $12 billion, likely making it Walmart's largest acquisition to date.

Amazon's bid for a majority stake in Flipkart will cut no ice with some of the biggest investors as well as the top management team of India's largest online retailer, as the American giant's offer-made on Wednesday- is not high enough to cover the potential risks, said two people aware of the details. It is believed that this offer is equal to Walmart's however, Amazon has proposed a $2bn breakup fee and Walmart's offer would mean the USA retail chain picking up an 80 per cent stake.

Presently, Walmart is planning to acquire majority stake in Flipkart and it has already offered to buy the shares of major stakeholders of the company, including that of SoftBank. There are investors who would question Amazon about its investments.

Walmart's urgency to stem market share losses to rivals like Aldi or Amazon has also seen it launch talks to merge its United Kingdom arm ASDA with J Sainsbury, in which it will hold a minority stake.

India's e-commerce industry is expected to reach US$200bn by 2026, up from $38.5bn past year, according to the India Brand Equity Foundation, which was founded by the Indian government.

The sources added that Sachin Bansal, founder of Flipkart, was in the U.S. last week to oversee final lap negotiations with Walmart.

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Flipkart last raised around $2.5 billion in August, the round saw the entry of Japan's Softbank as an investor in the company. Amazon has committed $5 billion to the Indian market.

Jeff Bezos, Amazon's chief executive, touted in a letter to shareholders last month that Amazon was India's fastest growing online marketplace.

Softbank, which controls 25 percent of Flipkart, has apprehensions about selling to Walmart and has been encouraging the Amazon offer. Any Flipkart-Amazon deal is likely to come under the scanner of the Competition Commission of India (CCI), given the dominant market share these two entities have grabbed in the e-commerce space - around 70 per cent collectively.

Even for Flipkart, merging itself with Amazon at this stage will be like leaving a lot at the table, finds Ujjawal Chaudhry, engagement manager, e-tailing, RedSeer. It might not want to leave the game this early.

Soft-Bank, has been willing to invest about $4 billon afresh into the Indian e-commerce leader, if it pursued an alternate merger with arch-rival Amazon, sources close to the matter told.

SoftBank stands to make a tidy profit on a deal it cut previous year.

  • Desiree Holland