Indian e-commerce company Flipkart might go for an initial public offering (IPO) in as early as four years if minority investors holding 60% of its shares wish so, said American retailer Walmart in a filing to the USA regulator.
Walmart has already signed agreement to purchase shares worth $16 billion which is 77% of Flipkart, here's how the structure of deal looks like.
The remaining positions will be taken up by Flipkart founder Binny Bansal and two remaining directors to be appointed by certain minority shareholders.
Flipkart board will have co-founder Binny Bansal, who has chose to stay on, as well as two directors from other minority shareholders that includes Tencent Holding, Tiger Global and Microsoft Corp. Flipkart may opt for an initial public offering after four years of closing the Walmart deal at a valuation no less than what was paid by Walmart. "No termination fee would be payable if the share issuance agreement or the share purchase agreement were terminated", Walmart said in the filing.
Walmart said it could appoint or replace CEO and other key executives of Flipkart in consultation with Bansal and the board.
"While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart's ambition to transition into a publicly-listed, majority-owned subsidiary in the future", Bentonville, Arkansas-based Walmart said Wednesday, before details of the arrangements were disclosed in the filing late Friday.
Upon the terms and subject to the conditions set forth in the Share Purchase Agreement, contemporaneously with the closing of the Share Issuance, Walmart will purchase from the Sellers Preference Shares and Ordinary Shares of Flipkart for an aggregate purchase price of approximately $14 billion in cash (the "Secondary Share Purchase", and together with the Share Issuance, the "Transactions"). Walmart's additional share purchase, if made, will be at the same price at which it made the initial investment, the filing said.
There are other investors who give their holding away to Walmart are - Accel India with 6.4%, eBay with 6% stake and others 6.21% stake.
In case, SoftBank decides not to sell, Walmart would be left with about 55 per cent of Flipkart.
Moreover, holders of 40 per cent of Flipkart shares held by the minority shareholders - or a combine holding of 9.2 per cent of the total equity - will be able to veto "certain material, non-arms' length transactions between Flipkart and Walmart".
"Shareholders agreement would expire upon the consummation of the IPO, whether initiated by the board or the minority stockholders", it added. These rights will, however, expire if Walmart increases its stake to 85% or more, the retail giant noted in the filing. While it was earlier believed that Masayoshi Son's SoftBank would sell its entire stake, reports now say that it has not yet taken any decision on the sale of its over 20 per cent stake in Flipkart.