Report: Flipkart closes in on $1B Snapdeal acquisition

Dive Brief:

  • India’s Flipkart is reportedly closing in on a $1 billion deal to acquire Snapdeal, one of its rivals in India’s e-commerce market, after Snapdeal investor Nexus Venture Partners approved the sale, Business Insider reported Friday.

  • A term sheet for the deal reportedly is close to be signed, and Business Insider sourced reports suggesting NVP could collect $100 million in the deal, while fellow investor Kalaari could pick up $80 million and Snapdeal’s founders could land about $25 million each.

  • SoftBank owns a 30% stake in Snapdeal and reportedly convinced NVP to grant its approval of the sale. Softbank suffered a loss of $1 billion on its investment in Snapdeal over the last year. NVP owns about 10% of Snapdeal. 

Dive Insight:

Flipkart's Snapdeal buy has been rumored to be in the works for a while, and if finalized, would mark the biggest acquisition in the Indian e-commerce space. The match of the No. 1 and No. 3 e-commerce providers in India will help consolidate and strengthen Flipkart's top market position at a time when it is facing a serious and growing competitive threat from Amazon.

In fact, a recent report from 7Park Data showed that Amazon's mobile app is making great strides in India, in terms of user growth, engagement rates and other factors, and largely at the expense of Flipkart. The juiciest detail in this competitive battle is the fact that Flipkart actually was started in 2007 by former Amazon employees. In the 10 years since, India's e-commerce market has become hotly competitive, and Amazon has beefed up its own ambitions to compete there.

Flipkart pretty clearly would love to see more organic growth occur in its business, but buying its way to a better defense against Amazon may go over just as well. The Snapdeal acquisition, assuming it happens fairly quickly after these investors approvals, would be Flipkart's second acquisition in a short stretch of time, after the company bought eBay's India operations last month for about $500 million.

As Flipkart gobbles up market share, it's worth noting that just last year it was seen as a possible acquisition target for Wal-Mart as the U.S. brick-and-mortar retailer sought to keep up with Amazon's ongoing international expansion. If that deal had happened, it would have extended the battle between Wal-Mart and Amazon to a new frontier. However, Flipkart appears to have decided that it isn't ready to be a chess piece for a U.S. retail giant. The deal with eBay and a potential acquisition of Snapdeal prove that Flipkart isn't ready to let go of market share on its home turf without a fight.

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Top image credit: Flipkart