US retail giant Walmart is giving itself more leeway to close the acquisition of a 77%-stake in India’s largest online retailer Flipkart, according to documents filed for a mega bond issue to finance the transaction.
Walmart has given itself time till June 7, 2019, to close the deal, failing which it will have to repay a significant portion of the bond issue even as the Bentonville-based retailer remains confident of completing the transaction before the end of 2018. A March 9, 2019 deadline had been set in the share purchase agreement between the two companies around which the termination rights have been negotiated, as per a regulatory filing made in May.
In June, Walmart kickstarted the process of selling $16 billion worth of bonds to help finance its investment in Flipkart, offering fixed and floating rate notes in nine parts.
However, Walmart maintains that the new deadline is in relation to the bonds issued to fund the deal and it continues to expect to close the deal by the end of this year, subject to regulatory approvals. The deal is currently being evaluated by the Competition Commission of India (CCI).
“Walmart is working with the authorities in India and we are hopeful of timely approval. We are still expecting closing later this calendar year, subject to regulatory approval,” said a Walmart spokesperson. “The date in the 8-K filing on June 21, 2018, is related specifically to the bonds we recently issued.”
In May, Walmart and Flipkart told CCI that the relevant market for their combination is in B2B sales since Walmart does not have a presence in a consumer-facing business in India. The two parties said that the “proposed transaction does not give rise to competition concerns” and the “relevant market” for the partnership is the “pan-India market for B2B sales”.
Meanwhile, retail and trader groups continue to oppose the deal. About 10 lakh traders will take to the streets on Monday as they hold a nationwide protest against the Walmart-Flipkart deal, among other issues. The protest is being organised by trade body Confederation of All India Traders (CAIT) and is likely to draw participation from the RSS-affiliated Swadeshi Jagran Manch. The protest is expected to be a sit-in across 1,000 spots in 500 cities.
The demand of the trader community is threefold. “One is rejection of the Walmart-Flipkart deal by the government. Second is to formulate an ecommerce policy,” said Praveen Khandelwal, national secretary general, CAIT. “Our third demand is for the government to create a regulatory authority to monitor the ecommerce industry.”
Khandelwal said that if the Walmart-Flipkart deal goes through, they expect Walmart to manipulate and overtake the retail trade of India by sourcing globally, thereby having a negative impact on small traders.
“Walmart is like the American version of the East India Company,” he added.
The CAIT also filed a petition during the end of May with the anti-trust regulator CCI, objecting to the Walmart-Flipkart deal, citing the reason that such a merger would lead to predatory pricing, deep discounts, among others.
Prior to this, the All India Online Vendors Association (AIOVA), which represents over 3,000 online sellers, filed a petition with the CCI against Flipkart for giving ‘preferential treatment’ to a few seller entities and thus enabling steep discounts on its platform.
Walmart had announced in May that the retail giant intends to pick up a 77% stake in Flipkart for $16 billion at an estimated valuation of $20-22 billion. This deal, if goes through, will be one of the largest e-commerce acquisitions, providing exit to Flipkart’s major investors including Accel Partners, Naspers and co-founder Sachin Bansal, among others.
Source: Economic Times