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Amazon May Have Offered a Break-Up Fee in Bid to Buy Flipkart

Amazon’s interest in the retailer comes even as Walmart is in talks to buy 55% in Flipkart.

Updated
Tech News
2 min read
Amazon may bid to buy Flipkart as a deal with Walmart looms over Flipkart.
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If you can’t beat them, buy them! Word on the street is that Amazon is offering a break-up fee of between $1 billion and $2 billion in its rumoured bid for Flipkart, according to a report in Factor Daily.

A few days ago, while there was speculation on the Walmart-Flipkart merger, news that global E-commerce giant Amazon might also submit an offer to rival Walmart’s bid to buy India’s largest E-commerce firm Flipkart also surfaced, according to a report in LiveMint.

A break-up fee is an amount offered as a surety by a party interested in picking up a stake in another company, in case the deal does not go through. This shows how serious Amazon is about the deal with Flipkart, if the report is true. This fee of over $1 billion applies if Flipkart’s valuation is between $18 billion and $20 billion.

Amazon has deep pockets and its last acquisition of Whole Foods was worth $13.7 billion. It has also in the past acquired companies such as Twitch, Zappos, Woot and IMDB among others. 

Flipkart too has been on an acquisition spree. Its last acquisitions include PhonePe and Jabong in 2016, and Ebay India in 2017. It bought its other rival Myntra in 2014 for $300 million.

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As the Flipkart-Walmart deal is closing in, Amazon has held early exploratory talks to purchase Flipkart, LiveMint further quoted the above mentioned sources.

Walmart is in talks to buy 55% of Flipkart’s shares in a deal that could value Flipkart at $21 billion, the people mentioned above told LiveMint.

However, Amazon and Walmart are not the only one’s interested in buying Flipkart, it is said that Google also offered to invest in Flipkart at a valuation of $15-16 billion, Mint had reported in February.

Flipkart’s negotiations are being led by Tiger Global’s Lee Fixel (Tiger Global is one of Flipkart’s investor), LiveMint further reported.

Amazon has invested about $2 billion in India since it set up shop in 2013 and plans to invest $3 billion more. However, they still lag behind Flipkart by a margin in India’s e-commerce market.

A column in Mint earlier had said, “At some point, if Amazon believes that the price of a scorched earth battle is too high, it might sue for peace and move to merge with Flipkart. If that happens, both parties will win,” the column said.

A couple of people familiar with the deal told The Quint though that these rumours are being fanned because Flipkart is in its due diligence phase on the Walmart deal, and such reports help with its valuations.

Watch this space for more as the story unfolds.

(With inputs from LiveMint and Factor Daily)

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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