Snapdeal, today officially confirmed that it is calling off its merger talks with rival Flipkart, and will continue to operate as an independent company. Snapdeal was in talks with Flipkart for selling its business to the latter in a $900-950 million deal.
The Gurgaon-based online marketplace in an official statement on Monday, said,
“Snapdeal has been exploring strategic options over the last several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result.”
Earlier, there were reports that Snapdeal has accepted the revised offer of $900-950 million from Flipkart. However, the important meeting due to take place in Bengaluru to settle down the proposed merger has been called off.
Law firm J Sagar Associates and banker Credit Suisse, which were representing Snapdeal in the negotiation, were going to meet with their counterparts, Khaitan & Co and Goldman Sachs from Flipkart, in a bid to close the transaction. But the talks have now been canceled, according to sources.
As per the terms of the bid offered by Flipkart, the Bengaluru based e-com giant had asked for 100% approval from Snapdeal stakeholders before going ahead. Flipkart had also put forth a set of demands in front of the Snapdeal board that made them uncomfortable and leading to further call off.
The e-commerce player says it wants to be financially self-sustainable by selling its non-core assets. It is being said that sale of FreeCharge for Rs. 385 crore to Axis Bank last week fetched Snapdeal much-needed cash. The company is also in talks with some potential buyers for its logistics business Vulcan Express.
SoftBank, which owns the largest (33%) stakes of the company, and was negotiating the deal, also released a statement on this collapse,
“Supporting entrepreneurs and their vision and aspirations is at the heart of Masayoshi Son’s and SoftBank’s investment philosophy. As such, we respect the decision to pursue an independent strategy.”
It is speculated that Kunal Bahl and Rohit Bansal, the founders of Snapdeal are not ready to back the deal. Instead, they proposed running a leaner and independent version of the company. According to sources, the co-founders are actively working on “Plan B” and have taken into confidence most of their senior management.
“The two co-founders have said they will vote in favor of Snapdeal going forward as a smaller, but independent entity, terming it ‘Snapdeal 2.0’,” said one of the sources from the company.
The booming e-commerce sector in India has been witnessing a fierce battle for dominance between the US giant Amazon and homegrown Flipkart. So, had this largest acquisition in the Indian e-commerce marketplace happened, it would have marked a niche for itself.