Flipkart-Snapdeal: Nexus says no deal to SoftBank
SoftBank now needs to win over just one early investor of Snapdeal before it can start working on the actual sale of the beleaguered company to a resurgent Flipkart, which announced a $1.4 billion fund raise last month.
Early investor Nexus Venture Partners is still holding out, according to two people with direct knowledge of the discussions. The Board met on Tuesday to discuss the possible sale.
"It is a commercial dispute. The issue is Nexus wants a stake in the merged entity. They would like some cash now plus upside in the form of stock in the merged company," said a person with direct knowledge of the discussions but who spoke on condition of anonymity. "But this is not a deal breaker. Backchannel discussions will continue. I think the issues will get resolved within a week," the person added. Earlier, Nexus was reportedly asking for $100 million for its 11 percent stake in the Gurugram-based company.
Snapdeal's founders have got around $60 million together to sign off on the deal, according to the source. The source added that another early investor, Kalaari Capital, has agreed to the deal. While Kalaari had initially agreed to an all-cash deal, they might now ask for cash plus stock in the merged entity if Nexus gets such a deal.
Snapdeal employees who hold stake will also be compensated. But the two sources YourStory spoke to declined to share details of the exact form of compensation. Kalaari, Nexus, Kunal and Rohit had not responded to email queries sent by YourStory until the time of publishing.
Convoluted negotiations
SoftBank has spent the last few months trying to get Snpadeal's Board to agree to a sale to Flipkart. The Japanese major's Board has also approved the sale, according to reports. Snapdeal has been struggling with slow growth and a lack of investor interest. At its peak, Snapdeal was valued at over $6 billion; now the company is being valued at just $1 billion.
Read YourStory's article published in April - Clash of the Titans – Masa San and Jack Ma to set up battle with Jeff Bezos via Flipkart - for more details on why SoftBank and Flipkart want this deal.
Snapdeal has been through some tough times. It has shut down its C2C arm Shopo and fashion platform Exclusively, and has laid off more than half of its workforce. Monthly GMV had fallen to an all-time low of Rs 300 crore. It has had to deal with other issues as well, among them court cases, police complaints and banks sending notices to some of the sellers on the platform. A sale to Flipkart might finally put all these issues to rest.
What next
If SoftBank's backchannel discussions with Nexus bear fruit, then the Snapdeal Board will meet and formally approve the initiation of talks with Flipkart. The date for the next meet has not been set, according to the source quoted earlier.
Flipkart then needs to approach Snapdeal with an offer. Due diligence is yet to happen. "Flipkart has not been given access to any of the documents or financial details yet," said the person. The actual sale should take about two months.
(Disclaimer: Kalaari Capital is an investor in YourStory)
