'Walmart can infuse $3 bn in Flipkart'

Walmart to pay $16 billion for control of India's Flipkart, shares slide

Walmart announced earlier this week that it will pay $16 billion for a roughly 77 percent stake in Flipkart in what is the USA retail giant's largest-ever deal and to beat the foremost rival Amazon.com Inc (AMZN.O) in a key growth market.

At any time after the closing of the transactions and on or before the first anniversary of the closing, the purchaser, or any of its affiliates, may "request that Flipkart issue additional ordinary shares with an aggregate purchase price of up to $3 billion", said the SEC filing. 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.

The bargain today awaits clearance out of India's anti trust regulator and is predicted to close later this year.

The remainder will be held by existing shareholders, including Flipkart co-founder Binny Bansal, China's Tencent Holdings Ltd (0700.HK), Tiger Global Management and Microsoft Corp (MSFT.O), the company said.

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.

That deal could be sealed before the close of the Walmart-Flipkart transaction or immediately after, a source told Reuters, declining to be named as the talks are private.

Walmart also mentioned no celebration would be responsible to pay a termination fee if a share issuance or invest in arrangement with Flipkart were also terminated. In fact, the Beast of Bentonville had also said that it hoped to meld Flipkart's numbers into the revenues of Walmart's global operations by the end of the second quarter and had suggested that might impact the company's earnings per share by up to 30 United States cents.

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If Walmart proposes to transfer a sufficient number of Flipkart shares such that, following the transfer, it would no longer control a majority of the Flipkart shares or appoint a majority of the Flipkart directors, each Minority Shareholder would also be entitled to transfer all of its Flipkart shares to the proposed buyer or buyers of Walmart's Flipkart shares.

In a statement, Walmart said it would support Flipkart's transition into a publicly-listed, majority owned subsidiary in the future.

"Shareholders agreement would expire upon the consummation of the IPO, whether initiated by the board or the minority stockholders", it added.

The remaining positions will be taken up by Flipkart founder Binny Bansal and two remaining directors to be appointed by certain minority shareholders.

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. If this happens, then Walmart's shareholding in the Indian e-tailer could go up by a further 12-14 per cent, pushing its shareholding beyond 85 per cent.

In case, SoftBank decides not to sell, Walmart would be left with about 55 per cent of Flipkart. Here's what will happen in Flipkartm, if Walmart acquires 85% stake. While it was earlier believed that Masayoshi Son's SoftBank would sell its entire stake, reports now say that it has not yet taken any decision on the sale of its over 20 per cent stake in Flipkart.

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