Walmart may take Flipkart public in as early as 4 years
14 May, 2018, 00:31 | Author: Franklin Nunez
U.S. retail giant Walmart has an option to invest an additional $3 billion in India's largest online retailer Flipkart at the same valuation within a year of completing the acquisition of 77% stake in the company, according to the company's regulatory filings with the USA market regulator, the Securities and Exchange Commission.
Interestingly, Walmart also has the right to appoint or replace the Chief executive or other principal executives of the Flipkart group of companies, subject to consultation rights of the Flipkart board and the founder Binny Bansal.
For the first time, Walmart said the agreement also confers on it the right to seek an issue of a second tranche of fresh Flipkart shares "at any time after the closing of the transaction and on or before the first anniversary of the closing" for an aggregate purchase price of up to $3 billion.
Minority investors following the sale include Co Founder Binny Bansal, China's Ten-cent Holdings, U.S. Hedge-fund Tiger World Wide Management along with Micro Soft.
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Flipkart's board will be initially comprised of eight directors including five Walmart-appointed directors of which two directors must be unaffiliated with Walmart for at least two years after transaction close.
Walmart mentioned on Saturday at a filing using a US regulator that it could require India's Flipkart people in since four decades, inventing for the very first time an expected record deadline for Walmart's largest-ever acquisition. The IPO should be done at a valuation no less than that paid by Walmart under the share issuance agreement, subject to the satisfaction of other conditions regarding such offering. Binny Bansal, co-founder and group CEO, too continues in his role even as Sachin Bansal, co-founder and executive chairman made a decision to quit the board and the company.
Furthermore, Walmart has shed some light on its plans to come out with an initial public offering (IPO) for Flipkart.
If Walmart proposes to transfer a sufficient number of Flipkart shares such that, following the transfer, it would no longer control a majority of the Flipkart shares or appoint a majority of the Flipkart directors, each Minority Shareholder would also be entitled to transfer all of its Flipkart shares to the proposed buyer or buyers of Walmart's Flipkart shares.
Minority investors holding 60% of Flipkart's shares "may effect an IPO" four years after the close of the transaction, Walmart said in the filing to the US Securities and Exchange Commission.
The filing also says that there are no termination fees linked with the transaction. The USD 500 billion retail titan has disclosed in a US SEC filing that it might take Flipkart public in as early as four years.
Earlier this week, ET reported that Steuart Walton, grandson of Walmart founder Sam Walton, Judith McKenna, president at Walmart International, and Dirk Van den Berghe, regional CEO of Walmart Canada and Asia, will join the Flipkart board.
"In addition, holders of 60 per cent of the Flipkart shares held by the minority shareholders, acting together, may exercise veto rights to prevent certain significant transactions or other events involving Flipkart", it added. For now, Walmart is pumping $2 billion in cash and purchasing shares worth $14 billion from Flipkart's existing shareholders, the SEC filing said.
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