Walmart May Launch Flipkart IPO In As Early As 4 years

Ivan Schwartz
May 13, 2018

This would be done at a valuation no less than that paid by Walmart under the share issuance agreement. No termination fee would be payable by any party if the Share Issuance Agreement or the Share Purchase Agreement were terminated, it said. It is now only a matter of time for the deal to finish as it awaits the clearance from India's anti-trust regulator hence expected to close later this year. Walmart's filing assumes significance at a time when Flipkart's key shareholder, Japanese internet and telecoms giant, Soft-Bank, is undecided about the sale of its shares. Walmart had reported an EPS of $3.28 in Fiscal 2018.

Walmart notes that it may request Flipkart to issue additional shares with an aggregate purchase price of up to $3 billion, anytime in one year after the transaction close. It was not immediately clear whether such a pricing proviso was in compliance with existing Sebi regulations governing unlisted companies.

According to Walmart, in the May 11 filing with the U.S. Securities and Exchange Commission, minority investors holding 60 percent of Flipkart's shares "acting together, may require Flipkart to effect an initial public offering" (IPO) four years after the close of the Walmart-Flipkart transaction. The $500 billion firm added that the IPO will be not be less than the valuation at which Walmart acquired the company.

As a portion of the bargain, wal mart will initially appoint five supervisors to Flipkart's plank, two supervisors will probably be appointed by minority investors whilst Bansal will take a single plank seat, as stated by the filing. Binny Bansal, co-founder and group CEO, continues in his role while Sachin Bansal, co-founder and executive chairman chose to quit the company.

It also said it could appoint or replace Flipkart's chief executive and other key executives of group companies in consultation with Bansal and the board.

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The minority shareholders of Flipkart will be able to exercise a conditional right of veto over "specified decisions relating to Flipkart's business and activities", the filing said but did not spell out the details.

The Shareholders Agreement would expire upon the consummation of the IPO, whether initiated by the Board or the Minority Stockholders. Immediately after the closing of the Transactions, all Flipkart Preference Shares will convert into Ordinary Shares. SoftBank holds approximately 22% in Flipkart.

There are other investors who give their holding away to Walmart are - Accel India with 6.4%, eBay with 6% stake and others 6.21% stake. These rights will, however, expire if Walmart increases its stake to 85% or more, the retail giant noted in the filing.

So far, Walmart has not revealed the price at which it bought Flipkart stake, and different tranches may have been purchased at different prices.

It said among other transfer restrictions and subject to certain exceptions, transfers of Flipkart shares will be subject to a right of first refusal exercisable by Walmart and other significant minority shareholders, and in certain situations, co-sale rights.

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