Three months, more than 15 meetings, and a payout of at least $210 million later, it's a clear road now for Japanese telecom and internet giant SoftBank to merge its biggest Indian asset Snapdeal with leading e-commerce firm Flipkart.
The deal valuing Snapdeal at around $1 billion, a steep fall from its peak of $6.5 billion last year, signals the biggest consolidation in the sector and fierce competition between Jeff Bezos-led Amazon and the poster boy of Indian e-commerce, Flipkart. The transaction is through, sources in the know confirmed, and an announcement could come anytime within the next 72 hours.
The last roadblock for the deal was the veto power exercised by Snapdeal's early-stage investor Nexus Venture Partners (NVP). While spearheading the deal, SoftBank, the largest investor in Snapdeal, was unable to get Nexus on board for the payout that the Tokyo-based group had cited. On Thursday, word was out that Nexus had agreed on merging Snapdeal with Flipkart. Just a day ago, SoftBank had announced that it recorded $1.4 billion worth of losses over investments in Snapdeal and Ola.
Although there's no confirmation on the amount, it is learnt that Nexus has got around $80 million as exit money for its single-digit stake in Snapdeal, in a combination of cash and stock in the merged entity. Snapdeal founders Kunal Bahl and Rohit Bansal have not been offered any stake in the merged company, it is learnt.
Estimates suggest Bahl and Bansal, who hold approximately 6.5 per cent together in the company, would be richer by $60 million following the merger. The founders' networth was pegged at more than $350 million (Rs 2,300 crore) recently. SoftBank's payout of at least $210 million was made to key shareholders including the Snapdeal co-founders, and early stage-investors Kalaari Capital and Nexus - both with veto power.
While Kalaari came on board earlier, Nexus resisted the deal till now. Kalaari may have got around $70 million.
Even as Nexus has given its nod to the deal, the term sheet has not been finalised as yet. "There are a number of tweaks that need to be made in the term sheet. Also there are legalities attached to a deal of this size. Only after those things are done, would the deal be signed," said a source close to the board.
As soon as Snapdeal side of the transaction is tied up, SoftBank is expected to start its final talks with Tiger Global, a significant investor in Flipkart, to merge the two e-commerce companies.
The actual merger would take time, it is learnt. "Flipkart would take at least a month, if not more, to complete the due diligence," another source said.
Masayoshi Son-led SoftBank got veteran Kabir Misra to convince Snapdeal investors to sell their stake. It has taken him more than three months to do it. The Snapdeal board includes Misra, Nexus co-founder Naren Gupta, Snapdeal founders, Vani Kola from Kalaari Capital, independent director Akhil Gupta (who's vice-chairman Bharti Enterprises) and Lydia Bly Jett of SoftBank Group International.
The board had agreed that Snapdeal must be sold as it had become unviable, but the bone of contention was the valuation. While SoftBank was pinning the valuation at below $1 billion, other board members were asking for a valuation of at least $2 billion.
SoftBank currently owns 33 per cent, while Nexus has around 10 per cent and Kalaari eight per cent in Snapdeal, according to documents filed with the Registrar of Companies.