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.
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.
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.