Walmart can invest $3 billion more in Flipkart at same valuation

Walmart can invest $3 billion more in Flipkart at same valuation

Flipkart board will initially have eight directors: five Walmart-appointed, two appointed by certain minority shareholders and one founder.

Reuters formerly noted that Google-parent Alphabet was in talks to spend £ 3 billion to get a roughly 15% stake in Flipkart.

Walmart, in a US Securities and Exchange Commission (SEC) filing, gave details of its agreement to take about 77 per cent stake in Flipkart through infusing United States dollars 2 billion cash in the company and buying some of Flipkart investors' stake for USD 14 billion.

United States retail giant Walmart is looking to retain Flipkart co-founder Binny Bansal and other minority investors such as Tiger Global for at least four years, promising that it will protect the valuation of their shareholding and offer them the potential upside of taking the company public.

This included $14 billion earmarked for purchasing shares from existing shareholders and fresh capital infusion of $2 billion in Flipkart.

"Pursuant to a registration rights agreement to be entered into concurrently with the shareholders agreement, holders of 60 per cent of the Flipkart shares held by the minority shareholders, acting together, may require Flipkart to effect an initial public offering following the fourth anniversary of closing of the transactions", Walmart said. 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.

Even it would appoint or replace Flipkart's chief executive and other key executives of group companies after consulting Bansal and the board.

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Walmart has already signed agreement to purchase shares worth $16 billion which is 77% of Flipkart, here's how the structure of deal looks like.

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.

At the time of announcing the deal, Walmart had said it supported the Flipkart management's desire to go public in future. Walmart said the transaction to buy shares in Flipkart should close by March 9, 2019.

There are several situations under which the agreement can be terminated: the failure to win regulatory approval from the Competition Commission of India; material adverse change in Flipkart's business; inaccuracy of representations and warranties, and performance of covenants; and governmental or shareholder litigation challenging either of the share issuance or secondary share purchase transactions. No termination fee would be payable by any party if the Share Issuance Agreement or the Share Purchase Agreement were terminated, it said. The clause will help Walmart persuade Binny and Flipkart CEO Kalyan Krishnamurthy, who was a top executive at Tiger Global, to stay with the firm for a period of at least four years.

Following the acquisition, all significant stakeholders in the Indian online retail giant like Naspers, venture fund Accel Partners and eBay had confirmed they were selling their stocks to Walmart.

These veto rights for the minority shareholders will expire if Walmart owns 85 per cent of the outstanding shares of Flipkart. "If the drag along right is exercised, each minority shareholder must be entitled to sell all of its shares in the proposed transaction", the filing added. Under the deal, SoftBank Group will sell the entire 20% stake it holds in Flipkart through an investment fund, less than a year after the Japanese conglomerate invested $2.5 billion in the e-Commerce giant.