Snapdeal would rather launch a Snapdeal 2.0 than merge with Flipkart

Gurgaon-based e-commerce firm Snapdeal has terminated all talks for a distress sale to its arch rival Flipkart and wants to pursue an independent path, the company said in a statement. It was in talks to sell its ecommerce marketplace business to Flipkart for around $850 million.

With the deal now off, reports say SoftBank may look at investing in Flipkart separately, though it could not be independently verified.Greyhound Research chief analyst and CEO Sanchit Vir Gogia said Snapdeal 2.0 will need the company to have a different approach to survive and thrive.

Efforts towards Snapdeal's sale to Flipkart may hit a dead end after six months of negotiation. SoftBank said we respect the decision to pursue an independent strategy. "We look forward to the results of the Snapdeal 2.0 strategy, and to remaining invested in the vibrant Indian e-commerce space".

Mint reported on Monday that the proposed Snapdeal sale to Flipkart may be called off as the founders and shareholders of the struggling online marketplace have not yet agreed on the terms of the deal. There is no clause which stops the Japanese internet group from backing Snapdeal's rival Flipkart but it may raise concerns about its credibility as an investor if it does take that step, we had reported last week.

The deal was also contingent upon a nod from Snapdeal's high-profile minority investors, including Ratan Tata and Azim Premji's investment arm, PremjiInvest.

Compared to a valuation of about United States dollars 6.5 billion in February 2016, the sale to Flipkart pegged the value of Snapdeal at about USD 1 billion.

News pertaining to Snapdeal-Flipkart merger first came to light in April this year (Forbes India was the first to break the news). Some of SoftBank's other investments in India include budget hotel aggregator Oyo and ride hailing company Ola. While Flipkart, which recently raised $1.4 billion from Microsoft, Tencent and eBay, along with its subsidiaries Myntra and Jabong is a leader.

Reuters has previously reported that the founders' bid to keep Snapdeal independent is likely to result in layoffs at the company, which now employs about 1,200 people. Until now, there was hope on employees getting a payout with the Flipkart acquisition. Snapdeal has about 1,200 employees. Some of these employees were held back some months ago to keep the work going in Snapdeal. While the offer was much less than what Flipkart had proposed, founders Kunal Bahl and Rohit Bansal were pushing for the deal in order to regain control over their company as Infibeam was said to be providing them with an opportunity to continue operating as an independent entity. Amazon, especially, has been aggressive with a $5-billion war chest for India. SoftBank has asked for a new deal structure, this person said.

Vanessa Coleman

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