Indian online retailer Snapdeal has reportedly given the green light to a buyout bid of as much as $950 million by larger competitor Flipkart.
The board of Jasper Infotech, which is Snapdeal’s parent firm, last week approved Flipkart’s bid of between $900 million and $950 million; however, the deal would also require approval from Snapdeal’s smaller shareholders. Flipkart’s previous offer of $750 million was rejected by Snapdeal earlier this month, but this did not derail the negotiations.
In February 2016, Snapdeal’s valuation peaked at $6.5 billion. Since then, competition in India’s online retail space has become fiercely intense, leading to the massive drop off in value. Amazon has moved into the sector and pledged to invest $5 billion in India, cementing its position in the market. If the Snapdeal-Flipkart deal goes ahead, the combined entity would aim to compete with Amazon.
A share swap between Flipkart and Snapdeal would also provide Japan’s SoftBank Group with a stake in Flipkart. The Japanese firm is Snapdeal’s biggest shareholder, investing $627 million in the retailer in 2014 which it proceeded to follow up with almost $2 billion of funding.
Cheaper data tariffs and increased smartphone penetration are the main factors fomenting a massive increase in online shopping in India, which is creating a boom in the country’s e-commerce sector.
