India's Snapdeal said it had decided to remain independent and was ending all talks regarding a sale, bringing the curtain down on months of discussions around a possible acquisition of the e-commerce firm by bigger rival Flipkart.
India’s Snapdeal said it had decided to remain independent and was ending all talks regarding a sale, bringing the curtain down on months of discussions around a possible acquisition of the e-commerce firm by bigger rival Flipkart. The failure to forge a deal is a setback for SoftBank Group, the largest investor in Snapdeal, as the Japanese firm has been trying to engineer an all-stock transaction for months, as a means to secure a sizeable stake in Flipkart, India’s largest home-grown e-commerce player. The decision also puts e-commerce giant Amazon.com on a stronger footing in India, as for now it deprives Flipkart of a cash infusion from SoftBank which had been expected to come in parallel with this deal. The board of Jasper Infotech, which runs Snapdeal, had agreed in principle to Flipkart’s revised buyout bid of up to $950 million and a deal was pending approval of smaller shareholders, Reuters reported last week.
But obstacles remained with sources saying founders Kunal Bahl and Rohit Bansal were considering an alternate path. “The company has now decided to pursue an independent path and is terminating all strategic discussions as a result,” Snapdeal said in a statement on Monday.
Flipkart also insisted on getting approval from all Snapdeal shareholders for the deal to go through, two of the sources said. All sources declined to be named as the discussions were not public. “The deal being contemplated was incredibly complex to execute,” Snapdeal’s Bahl said in an internal email to employees after the company announced its decision to end talks.Vani Kola, the managing director of venture fund Kalaari Capital which was an early investor in Snapdeal, told ET NOW news channel that she was extremely disappointed with Snapdeal founders’ disregard for investor and employee interests.
“I believe that these actions harm the credibility of our nascent startup ecosystem in India,” Kola said. SoftBank, led by charismatic founder Masayoshi Son, said it respects Snapdeal’s decision to pursue an independent strategy. “We look forward to the results of the Snapdeal 2.0 strategy and to remaining invested in the vibrant Indian e-commerce space,” SoftBank said in a statement.
Standard Chartered’s private equity arm is in talks to acquire Snapdeal’s logistics arm Vulcan Express, one of the sources told Reuters. “We will need to keep a tight control on our costs and work towards becoming a hyper efficient culture delivering profitable growth, month on month,” Bahl said in his email. Reuters has previously reported that the founders’ bid to keep Snapdeal independent is likely to result in layoffs at the company, which currently employs about 1,200 people. Sources said that after asset carve outs and anticipated layoffs, the company is likely to be left with a much leaner workforce. A spokeswoman for Snapdeal was not immediately reachable for comment on the company’s rationalization plans.