Amazon offers to buy 60% stake in Flipkart

Amazon offers to buy 60% stake in Flipkart

However, Amazon was indeed interested in buying Flipkart, said two sources, asking not to be named. Moreover, a longdrawn process could also create uncertainty among employees and vendors of Flipkart, the sources said.

As reported by FactorDaily earlier, the CNBC TV18 report also states that Amazon, in its bid, has offered a breakup fee of $2 billion.

People in the know said that Flipkart has that kept its options open for the initial public offer (IPO) in the future. According to CNBC-TV18, a deal with Walmart would see the U.S. retail giant gaining three or four seats on Flipkart's ten-member board. Softbank, the largest investor in the Indian company with around 25 per cent stake, is also expected to sell a big portion of its holding in the deal.

Amazon's offer to acquire a majority stake in Flipkart comes at a time when rival Walmart is close to completing a $12 billion deal to pick up an equivalent amount of stake in the Indian firm.

Similar to other e-commerce players, Amazon also is a "valuation game" running on investor money and making losses, while Walmart is a $500 billion, profit-making entity. Flipkart and Amazon combined would control a little over 80 per cent of India's overall e-commerce market, which could raise red flags for the anti-competition regulators of the country.

As per reports from ET, Flipkart had put $400 million apart to buy shares back from it's small investors. "If the combined market share of the parties who are competitors exceeds 15%, then they will have to notify the CCI by way of a Form 2 - which requires the parties to furnish very detailed information, data and analysis", said Ravisekhar Nair, partner of competition law at ELP. According to reports, Amazon Inc has formally made the offer. In contrast, a Form 1 notification, which is what competing companies file when their combined market share is below 15%, requires an approval process of three months. Softbank, Flipkart's main stakeholder, however, had some apprehensions over a deal with Amazon.

Amazon has already been aggressively expanding in India on its own.

Walmart initially entered the Indian market in 2007 through a joint venture with India's Bharti Enterprises, years before Amazon arrived.

"Now with Walmart in the mix things are different", the source said.

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