U.S. retail giant fought off a competing offer from rival Amazon to complete its biggest ever foreign investment Walmart on Wednesday has agreed to pay $16 billion for a roughly 77 per cent stake in India's largest online shopping site Flipkart, the U.S. retailer's biggest foreign investment as it battles rival Amazon.com in one of the world's biggest emerging markets.
Flipkart sells consumer goods ranging from soaps to smartphones and clothes, and gives Walmart access to an e-commerce market that could be worth $200 billion a year within a decade, according to Morgan Stanley. It also plans to use newly issued debt to help finance the deal, which prompted S&P Global Ratings to switch its AA outlook on Walmart to negative from stable. Flipkart raised a sizeable $1.4 billion from Tencent, eBay and Microsoft, while SoftBank Vision Fund brought in an additional $2.5 billion to its kitty in 2017. It's now reportedly considering selling a majority stake in the unit, which includes a dozen different store types that could easily get broken up by a new owner.
Global retail giant Walmart on May 9, 2018 formally signed a definitive agreement to acquire 77 percent stake in Flipkart with an investment of around United States dollars 16 billion.
Walmart entered India in 2009 through a joint venture with Bharti Enterprises, and took full control of that business in 2013.
The deal that's being said to be impending since September 2016 is a fresh attempt by the Bentonville company to take on Amazon, in one of the biggest emerging markets in the world.
To start with, the e-commerce sector has now received a jolt of energy, as the battle for supremacy is now between Amazon and Walmart. Flipkart registered 20 shipments in the year of its debut. Moreover, Walmarts's rich extensive experience in retailing, logistics and supply chain management will help Flipkart grow its business without any hassle.
"Flipkart lacks the expertise in mom-and-pop stores while Walmart understands retail and "kirana" (small family-run) stores".
The deal all but assures an ongoing global rivalry between Walmart and Amazon.
India allows 100% FDI in e-commerce marketplace subject to certain restrictions.
Indian retail's deal counter will keep buzzing.
Walmart shares dropped as much as 4.2% to $82.12 as of 10:28 a.m.in NY - the lowest intraday price since October. "We initially invested in Flipkart in August 2012, and we're proud to have been part of the journey to build the leading e-commerce player in India".
Soon after signing the deal, McMillon addressed Flipkart employees in Bengaluru and would meet key policy makers here tomorrow to clear any misgiving about the deal.