Walmart Inc. has sought the approval of India’s anti-trust regulator for its $16-billion acquisition of Flipkart, according to a regulatory filing.
In a filing sent to the Competition Commission of India that was sourced by paper.vc, Walmart said its proposed buyout of Flipkart did not create any competition concerns and that the pecking order of the broader retail market in India remains unaffected by the deal.
Walmart is the world’s largest retailer but in India, the company only has a wholesale cash-and-carry business. Last week, Walmart India chief executive Krish Iyer said the company plans to open 50 new stores within the next five years, up from 21 stores now. Because of regulations banning FDI in direct online retail, Flipkart has adopted a complicated structure which comprises partially of a B2B entity and a B2C entity.
“The proposed transaction does not give rise to competition concerns, and therefore, the precise scope of the relevant market may be left open. Without prejudice to the above, for the sake of completeness and with a view to assist the Hon’ble Commission, it is submitted that the relevant market for the purposes of the Proposed Transaction is the pan-India market for B2B sales,” Walmart said in the filing on Friday.
Last week, Walmart agreed to pay $16 billion to buy a 77% stake in Flipkart, valuing the online retailer at about $21 billion in what is the biggest global e-commerce buyout in history. As part of the deal, Walmart has agreed to invest $2 billion directly into Flipkart and buy the rest of its stake from most of Flipkart’s investors including SoftBank Group, Accel Partners, Naspers and eBay Inc. Walmart is also in talks to bring along new strategic investors such as Google.
According to legal experts, Walmart’s proposed buyout of Flipkart should go through since it does not create an entity that has a monopoly-like position in either the offline or online retail business in India.
“Walmart only has a B2B operation in India and as such, the acquisition of Flipkart only affects the B2B market when Walmart sales are combined with Flipkart group B2B sales,” said Avimukt Dar, partner at Induslaw, a law firm. “The pecking order of the B2C e-commerce market doesn’t change with this deal. With Amazon operating in India, there will always be strong competition for Flipkart, so the Walmart deal is likely to be approved by the CCI.”
Prior to this, Walmart has not had a particularly smooth ride in India. In 2007, Walmart had set up a joint venture with Bharti Enterprises Ltd for wholesale stores. Bharti exited the joint venture six years later.
Walmart’s Flipkart deal marked the culmination of several months of negotiations between the two companies across two continents. During the last few months before the deal was closed, Amazon, Flipkart’s biggest rival in India, had also entered the fray to buy out the latter, as Mint reported first on 4 April. In the end, most of Flipkart’s largest investors ended up favouring Walmart due to fears of an Amazon-Flipkart merger potentially violating anti-trust laws.
Source: Mint