Mergers & Acquisition

PremjiInvest Objects To Flipkart, Snapdeal Merger

PremjiInvest has put a spanner in the works as far as the Snapdeal-Flipkart merger is concerned. The Azim Premji-backed company has objected to the large payouts offered to the two founders of Snapdeal as well as to two large investors,  Kalaari Capital and Nexus Venture Partners, as a part of the buy-out deal that was agreed upon with Flipkart.

Flipkart is already under pressure from SoftBank, one of the backers of Snapdeal, to merge with its investee to ensure that the latter does not die a slow death in the bleeding domestic e-retail industry.

Snapdeal’s two founders, Kunal Bahl and Binny Bansal, along with Kalaari and Nexus have been working hard on compensation as the proposed valuation of Snapdeal is a mere $1 billion, which is but a small fraction of its peak valuation of $6.5 billion. Two other investors, Kalaari and Nexus, are also set to receive $60 million besides a certain equity in Flipkart. The founders themselves, under the deal’s terms and conditions, will likely get a combined handout of $30 million.

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Snapdeal-Flipkart deal in trouble?

The bone of contention, as far as PremjiInvest is concerned, is the differential payments to the various stakeholders. Other than these four investors, no other investor is receiving any special concession. On Wednesday, the Premji-controlled firm, sent a letter to the Snapdeal board saying that $90 million that was being handed to Snapdeal shareholders and founders wasn’t acceptable.Another $30 million in special payments proposed by the Snapdeal board for the employees, on the other hand, is okay, the letter said.

The letter went on to say, however, that the $30 million in special payments that has been proposed by the Snapdeal board for the employees is okay. The two domestic e-tailing giants had, last month, struck a preliminary agreement over the merger. The talks hit a snag over the compensation which will be given to other investors of Snapdeal and its employees as well.

The deal was proposed to put a brake on Amazon’s forays into the domestic market. If the deal is not inked soon, the cash-strapped Snapdeal may face more pressing problems. Besides, Snapdeal also has a whole host of other investors, including the family office of Ratan Tata, Intel Capital and Bessemer Venture Partners, BlackRock, and Temasek.

A source with first-hand knowledge of the matter was quoted by Business Standard as saying,”“there can be many a slip between the cup and the lip,” as far as the merger was concerned.

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