The much talked about and hyped merger between the two home grown ecommerce rivals Flipkart and Snapdeal has been officially canceled. The Gurgaon based startup wants to pursue an ‘independent path’ and therefore will terminate all other strategic discussions, including the merger talks with Flipkart.
Termed as one of the biggest consolidation in the Indian ecommerce ecosystem, this merger has been the most talked about acquisition for the past five months with countless board meetings and multiple twists. A Snapdeal spokesperson in a statement said Snapdeal has been exploring various strategic options over the past several months and has finally decided to pursue an independent path. The spokesperson also added, Snapdeal has a new and compelling direction Snapdeal 2.0 and have made significant progress towards the ability to execute this by achieving a gross profit this month.
Both the majority shareholders of Flipkart and Snapdeal, Tiger Global and SoftBank had been pushing for this merger. SoftBank, which presently owns more than 47% of Snapdeal, would also invest in the merged entity and buy out one third of Tiger Global’s Flipkart shares. According to various reports, SoftBank might still invest in Flipkart and not continue its association with Snapdeal.
A spokesperson for Softbank said they will remain invested in the vibrant Indian ecommerce space and look forward to the results of the Snapdeal 2.0 strategy. They also added both Masayoshi Son’s and SoftBank’s investment philosophy has always been supporting entrepreneurs and their vision and aspirations. Therefore they respect Snapdeal’s decision to pursue an independent strategy.
Cofounders of Snapdeal Kunal Bahl and Rohit Bansal have been hesitant to merge with Flipkart since the very beginning, fighting SoftBank tooth and nail to prevent the deal. They have also been in talks with senior executives of various firms looking for alternative routes. Reports also mentioned the founders were also in talks with business to business major Infibeam, for a possible merger.
Flipkart’s revised termsheet also held various holdbacks and clauses as protection from all the decisions taken by the Snapdeal board that might have an effect on the company after the merger for a period of two years. The new clauses laid the blame of any wrongdoing on the Snapdeal shareholders and held back a part of the money for the first couple of years. Ratan Tata, Foxconn, Temasek and BlackRock had given their in principal approval for the merger. The approval of 26 other shareholders was required for the deal to go through.
Snapdeal found a little breathing space after the sale of its online digital payments platform FreeCharge to Axis Bank in a Rs. 385 crores all cash deal. The all cash sale provided Snapdeal with the ammunition necessary to remain independent for a couple of more years and retain their control over the online market space. Post the sale of FreeCharge Kunal Bahl, in an email to all employees, termed the acquisition a great outcome calling the second chance an opportunity of a lifetime they must seize. Snapdeal has also been looking to sell their logistic arm Vulcan Express.
