Again the rumours that have been circulating for months received official confirmation.

Walmart will take a 77% stake in Flipkart for the price of US$16 billion, making it the world’s largest ecommerce acquisition to date.

Binny and Sachin Bansal (no, they are not related) – finally seeing light at the end of the tunnel, and also tonnes of money in their pockets

Talks first started in late September 2016. Tencent, Tiger Global and Microsoft are to remain as key strategic and technology partners – which we can say, is not surprising (it seems Tiger is not that eager to cash out their deals anymore).

Interests are aligned

Walmart has been trying to enter India’s massive retail sector for a good number of years – however, the government insisted that the sector be closed to foreign capital, protecting the millions of Kirana shops that are pillars of social stability (and votes).

Flipkart desperately needed a respite against Amazon’s onslaught. Unlike in China, Amazon does not really have cultural and operational disadvantages, in fact, Amazon has probably been taking the lead.

Bezos can’t be too happy with the Walmart deal. The question is, can Amazon still emerge the undisputed winner in India?

Being a standalone company without a profitable arm to subsidize all the investment necessary to fend off Amazon, Flipkart had to find a trade buyer – with Alibaba backing PayTM mall, Walmart is probably the only candidate left with such appetite.

Irking Amazon at all costs

One curious fact is why Softbank, Alibaba’s biggest shareholder, did not push Flipkart into the arms of Alibaba. We do not know – and frankly speaking Alibaba’s backing of PayTM Mall is very shaky. It would be quite impossible for PayTM Mall to catch up if it still keeps wobbling about its strategy (and the execution).

Did Jack Ma decided to “tai-chi” this deal away? After all – going head to head with Amazon at this time may not be a good idea when they are still trying to maintain their lead in Southeast Asia.

We have previously shared about Flipkart making a comeback, and this deal proves that Flipkart may still have good odds to succeed in their battle against Amazon.

Why Walmart decided to irk Amazon in India is anyone’s guess. We think that for Walmart, to stop Amazon’s momentum is probably more important than grabbing India as a market for themselves.

This is in line with other bets, such as the US$3 billion Jet.com acquisition, to not lose the retail crown in the digital commerce age.

Overpaid?

It seems, though, Walmart is not as cutthroat as Amazon or Alibaba in such acquisition. Remember when Amazon acquired Souq.com in the middle east after negotiating a more than 40% haircut from the latter’s previous valuation? Remember Alibaba Squeezed Lazada’s valuation hard for the acquisition two years ago? Notice the fire sale (to Alibaba) Daraz had to do to avoid being shut down by Rocket?

Quite strange for Walmart which is famed for being ruthless about cost cutting and squeezing the suppliers.

Maybe they are desperate as well?

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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