Snapdeal-Flipkart merger could well be officially announced on Wednesday. Nexus Venture Partners, one of the early investors in Snapdeal, has nearly agreed to end the impasse with regard to the merger. Though a few more details are to be ironed out, a formal agreement is most likely to be made in the coming days if not on Wednesday, sources privy to the development said.
After its last week’s inconclusive board meeting, Softbank, the biggest investor in Snapdeal, has been taking up the issue with Nexus informally over the week. According to sources, Nexus is closer to agreeing with the Flipkart-Snapdeal merger. A meeting was held on Tuesday as well, sources said. “Nexus has almost agreed to it. Tomorrow the board is meeting, but will have to see whether a formal announcement happens tomorrow or not,” said a source privy to the development.
Nexus declined to comment on the development. Replying to a mail from Financial Chronicle, Nexus co-founder Sandeep Singhal said: “I m sorry Nexus will not be commenting on Snapdeal.”
“For early investors like Kalaari and Nexus, Snapdeal has been their key investment to showcase and the growth of the company has helped them even raise further funds. So, they have been putting pressure on getting the valuations right for their ‘prized investment’. However, everyone knows that it is in the favour of all the stakeholders to get the deal done as early as possible. Snapdeal has already received media attention, the brand equity of the company is deteriorating and the valuations too are going down. So all would wish to wrap it up before the valuations further deteriorate,” an industry insider told FC. The industry has been expecting both the early investors to get on board sooner or later.
Sources say, Nexus has been having reservations about the valuation of the company. They also wanted to have a higher stake in the merged entity. Nexus has 12 per cent equity in Snapdeal and Kalaari 8 per cent. Both the investors have a seat each in the Snapdeal board and veto powers. Softbank has close to 34 per cent stake and two seats in the board while the promoters — Kunal Bahl and Rohit Bansal — own a share of 6.5 per cent. Other investors Ratan Tata and Ontario Pension Fund own the rest of the shares in the company. In the absence of veto powers, they don’t have a choice but to sell their stake to Softbank at the given valuation. Kalaari has already given its nod to the merger. Once through, this will be the largest merger in the e-commerce space, which will see the top player and the third one coming together to fight the onslaught of Amazon, which has already grabbed the second slot from Snapdeal. Apart from the merger , sale of e-wallet service Freecharge and the logistics arm have to be discussed among the stakeholders. This could be taken up once the merger deal receives everybody’s consent.
