Walmart Beats Amazon on Flipkart Deal

Flipkart Online Services Pvt, India’s leading e-commerce company, is leaning toward selling a controlling stake to the Bentonville, Arkansas-based company, Walmart, rather than Amazon.

Walmart beat Amazon in the deal because of “greater certainty in such a deal” as the former looks likely to take the next round in the battle for India’s retail market over the latter company.

Both U.S. companies are bidding for a controlling stake in Flipkart at a valuation of about $20 billion, said the people, asking not to be identified because the matter is private.

Walmart, Amazon, and Flipkart declined to comment.

Flipkart-Walmart Deal

Flipkart’s board recently met to discuss the competing proposals and thought Walmart could close a deal more quickly and smoothly.

Walmart faces fewer regulatory hurdles because it has no online retail presence in the country now, while Amazon is the second-largest e-commerce player and Flipkart’s primary rival.

Flipkart founders Sachin and Binny Bansal also favor Walmart because they would continue to help lead the business. Also, the U.S. company’s executives have emphasized their commitment to the market.

A Walmart deal has been discussed since at least last year and could still change or fall apart.

Walmart is in talks to take a minority stake in Flipkart that could go up to 50 or 60 percent, said the people. The amount will depend in part on which of Flipkart’s existing shareholders want to sell. That includes SoftBank and Tiger Global Management. It was reported last month that Walmart would likely pay about $7 billion for one-third of the company.

If completed, the deal would give Walmart a major stake in an emerging market of 1.3 billion people. The U.S. company is the world’s largest retailer, but it has struggled against Amazon as consumers increasingly migrate to online commerce.

India is the next big potential prize after the U.S. and China, where foreign retailers have made little progress against Alibaba Group Holding Ltd.

Amazon Keeping up

Meanwhile, Amazon founder Jeff Bezos has committed $5.5 billion to India and his country chief, Amit Agarwal, has made progress by adapting the site to local conditions.

Amazon and Bezos are pushing hard for a deal with Flipkart because they realize Walmart’s money will fortify its rival and make the competition even more fierce.

By contrast, an Amazon deal for Flipkart would consolidate the market and allow Bezos to step up investments in a country still in need of basic infrastructure for faster delivery and high-quality goods.

Still, an Amazon deal would be much more complicated than one with Walmart, said, one person. Because of regulatory concerns, Amazon would likely have to offer concessions to government authorities, such as continuing to operate the two e-commerce sites as independent brands.

Bezos would also have to persuade Flipkart and its board to take a chance on government approval. Perhaps, it’s by guaranteeing a large breakup fee if the deal fails.

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