Softbank will need two Ayes for Snapdeal-Flipkart merger
NEW DELHI: The consent of at least two major Jasper Infotech shareholders will be required for SoftBank to push through the sale of the company to rival ecommerce venture Flipkart, according to people familiar with the developments.
As per the shareholder agreements, three out of the four major stakeholders — SoftBank Group Corp, early backers Kalaari Capital and Nexus Venture Partners, and promoters Kunal Bahl and Rohit Bansal — who control six of the seven seats on the company's board, will need to approve the merger of Snapdeal with Flipkart.
SoftBank's stake in Jasper stands at about 33%, while Kalaari and Nexus own about 8% and 10%, respectively. Both the founders, combined, own about 6.5% of the company, which at its peak early last year, was valued at about $6.5 billion, but now finds itself in dire straits.
According to people aware of SoftBank's plans, the Tokyo-headquartered investor is confident of getting Bahl and Bansal, to agree to the deal, but it is yet to get consent of Kalaari and Nexus. This, however, could not be independently verified by ET. Emails sent to Jasper, Kalaari and Nexus did not elicit responses at the time of going to press.
If the merger secures the support of the investors, it could close in four to eight weeks, paving the way for SoftBank's entry into Flipkart, the country's largest ecommerce company.
As part of a two-step agreement, after the merger, the strategic investor will become a significant shareholder in India's largest ecommerce company by making a substantial investment of up to $1.5 billion.
Read: SoftBank may sell Freecharge at 50% discount for $200 million
SoftBank will infuse fresh funds into the company as well as buy shares from Tiger Global, the New York-based investor, which is currently Flipkart's largest shareholder.
This fund infusion will be in addition to the $1billion which Flipkart is expected to raise from Chinese internet conglomerate Tencent, US-based online marketplace eBay and Microsoft.
The swap ratio between Snapdeal and Flipkart has not been finalised, and the final price at which Kalaari and Nexus could exit is also yet to be arrived at. Credit Suisse, the banker appointed to look into the deal, made a presentation to the board and investors, spelling out the benefits of the merger.
Also Read: Snapdeal's top brass over Bangalore Fashion Week bills
"Softbank, Alibaba and Foxconn will all lose money in the merger. But it (the merger) is the best option, as it will provide a home for Snapdeal and its 3,000 employees. Why should Kalaari Capital and Nexus hold out and demand greater returns on their investments?" said a person close to the development.
Snapdeal, which was once the second-largest ecommerce company in the country, has seen its share of the pie reduce significantly, hurt by Amazon's rapid growth, and has been forced to lay off hundreds of employees in a bid to reduce its monthly spending burn.
SoftBank had never cut funds or reneged on its financial commitments, said a person aware of the Japanese investor's plans. It had offered to invest at valuations of $2.5 billion and $1.5 billion, respectively, but these offers were turned down by other investors, he said.
As per the shareholder agreements, three out of the four major stakeholders — SoftBank Group Corp, early backers Kalaari Capital and Nexus Venture Partners, and promoters Kunal Bahl and Rohit Bansal — who control six of the seven seats on the company's board, will need to approve the merger of Snapdeal with Flipkart.
SoftBank's stake in Jasper stands at about 33%, while Kalaari and Nexus own about 8% and 10%, respectively. Both the founders, combined, own about 6.5% of the company, which at its peak early last year, was valued at about $6.5 billion, but now finds itself in dire straits.
According to people aware of SoftBank's plans, the Tokyo-headquartered investor is confident of getting Bahl and Bansal, to agree to the deal, but it is yet to get consent of Kalaari and Nexus. This, however, could not be independently verified by ET. Emails sent to Jasper, Kalaari and Nexus did not elicit responses at the time of going to press.
If the merger secures the support of the investors, it could close in four to eight weeks, paving the way for SoftBank's entry into Flipkart, the country's largest ecommerce company.
As part of a two-step agreement, after the merger, the strategic investor will become a significant shareholder in India's largest ecommerce company by making a substantial investment of up to $1.5 billion.
Read: SoftBank may sell Freecharge at 50% discount for $200 million
SoftBank will infuse fresh funds into the company as well as buy shares from Tiger Global, the New York-based investor, which is currently Flipkart's largest shareholder.
This fund infusion will be in addition to the $1billion which Flipkart is expected to raise from Chinese internet conglomerate Tencent, US-based online marketplace eBay and Microsoft.
The swap ratio between Snapdeal and Flipkart has not been finalised, and the final price at which Kalaari and Nexus could exit is also yet to be arrived at. Credit Suisse, the banker appointed to look into the deal, made a presentation to the board and investors, spelling out the benefits of the merger.
Also Read: Snapdeal's top brass over Bangalore Fashion Week bills
"Softbank, Alibaba and Foxconn will all lose money in the merger. But it (the merger) is the best option, as it will provide a home for Snapdeal and its 3,000 employees. Why should Kalaari Capital and Nexus hold out and demand greater returns on their investments?" said a person close to the development.
Snapdeal, which was once the second-largest ecommerce company in the country, has seen its share of the pie reduce significantly, hurt by Amazon's rapid growth, and has been forced to lay off hundreds of employees in a bid to reduce its monthly spending burn.
SoftBank had never cut funds or reneged on its financial commitments, said a person aware of the Japanese investor's plans. It had offered to invest at valuations of $2.5 billion and $1.5 billion, respectively, but these offers were turned down by other investors, he said.
