Snapdeal declines Flipkart’s $800-850 million valuation; merger deal called off?
Earlier this week, IOSreportedthat Flipkart has wrapped up Snapdeal’s due diligence and the reports came out clean. Insiders also disclosed that the deal might be closed in a week.
As per newsreports, Flipkart did make an offer but Snapdeal rejected it. The reason? Low valuation.
Snapdeal not happy with $800-850 million
It was earlierspeculatedthat Flipkart would put a $1 billion valuation next to Snapdeal for this merger & acquisition deal. The expectations increased after due diligence completed without any major hiccup.
But Flipkart has made an offer of $800-850 million, which is much lower than the expected price. Therefore, Snapdeal’s parent company Jasper Infotech has declined the buy-out offer.
“The due diligence has been clean, with no major red flags raised. Therefore, the price being quoted significantly undervalues the company.”
Would the deal be called off?
Apparently, no. This was just the first offer that Flipkart has made and the discussions are still on. But the disagreement over valuation would definitely delay the merger deal, which would increase cash-strapped Snapdeal’s problems.
The Flipkart-Snapdeal merger has hit several roadblocks ever since the talks began. First, the early-stage investors and co-founders Kunal Bahl & Rohit Bansal werenot on board. Then minor investors raisedobjections. The Flipkart-Snapdeal acquisition deal is also under Reserve Bank of India (RBI)scannerto determine if there are any foreign exchange violations. In addition, Flipkart’s exclusivity agreement with Snapdeal also expired on July 3rd.
But each hurdle was handled by the concerned parties, in particular by Snapdeal’s largest investor Softbank. The Japanese MNC is the one that isspearheadingthis deal. People close to development believe that this hurdle would also get resolved by the investors,Snapdeal’s Softbank and Flipkart’s Tiger Global.
If it doesn’t, then the Kunal Bahl-led company has its options ready.
“While Flipkart is excepted to make a revised offer to Snapdeal, the board of the company may look at selling assets like Freecharge, Vulcan Express post the end of exclusivity period. Snapdeal may also looking at other options to sell to if Flipkart doesn’t go through with the acquisition,” an insidersaid.
WouldFlipkartagree to revise its offer price? If not, then wouldSnapdealaccept the lower valuation offer?