Flipkart, Snapdeal duel over $100 million valuation gap

Bloomberg

After Snapdeal’s board rejected a takeover offer from Flipkart Online Services Pvt., the two sides find themselves about $100 million apart as negotiations continue, people familiar with the matter said.
Flipkart, India’s largest e-commerce operator, is unlikely to raise its offer above $900 million while Snapdeal is seeking a price of $1 billion, the people said, asking not to be identified talking about a private deal. Talks could drag on for weeks after Snapdeal rejected an offer of $850 million as too low, the people said.
Efforts by India’s two major e-commerce operators to hash out a merger have stalled on a valuation that has already come down from $6.5 billion. Snapdeal backer SoftBank Group Corp. is pushing for a combination while some investors and the two founders hold out for a better price. As the local players try to reach a resolution, global giant Amazon.com Inc. is expanding steadily in the country with Chief Executive Officer Jeff Bezos pledging to invest $5 billion.
Smaller investors in Snapdeal who don’t have a board seat are unhappy over what they say are special payments proposed for two of the early venture capital backers, Kalaari Capital and Nexus Venture Partners, as well as founders of the startup Kunal Bahl and Rohit Bansal. They want parity for all investors, big and small, people familiar with the talks said last month. Flipkart has required that all investors in its Delhi-based rival agreed to a deal.
Representatives for Flipkart, Snapdeal and SoftBank declined to comment. Snapdeal is being advised by Credit Suisse Group AG, the people said. India is shaping up as a critical market for Amazon which was vanquished in neighboring China by domestic players and it is doing everything to ensure that it does not meet the same fate again.
For Flipkart, a Snapdeal merger opens up an avenue to garner further investments from SoftBank, whose Vision Fund has immense finances at its disposal. For SoftBank which
has already invested about $5 billion in India, the merger is crucial to establish itself as a prime investor in its e-commerce segment.
SoftBank recently invested $1.4 billion in India’s largest digital payments startup, Paytm, and also has existing investments in Ola which fiercely competes against Uber Technologies Inc. in the cab aggregation segment. The rejection of the $850 million offer was reported earlier by Press Trust of India.