Walmart buys Flipkart for $16 billion; This is what structure of deal looks like

The largest offline retailer Walmart has signed a definitive agreement with India’s e-commerce giant Flipkart to become the largest shareholder. Walmart will pay approximately $16 billion for an initial stake purchase of 77% in Flipkart, formally known as Flipkart Private Limited. This becomes world’s largest e-commerce deal, and also biggest FDI deal in India. 

Doug McMillon, Walmart’s president and chief executive officer said, “As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market.”

McMillon added, “Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.”

The investment will help accelerate Flipkart's customer-focused mission to transform commerce in India through technology and underscores Walmart’s commitment to sustained job creation and investment in India, one of the largest and fastest-growing economies in the world.

Here’s how the structure of Walmart and Flipkart deal looks like. 

Walmart’s investment includes $2 billion of new equity funding, which will help Flipkart accelerate growth in the future. Walmart and Flipkart are also in discussions with additional potential investors who may join the round, which could result in Walmart’s investment stake moving lower after the transaction is complete. 

Even so, the company would retain clear majority ownership. Tencent and Tiger Global will continue on the Flipkart board, joined by new members from Walmart. The final make-up of the board has yet to be determined, but it will also include independent members. 

The board will work to maintain Flipkart’s core values and entrepreneurial spirit, while ensuring it has strategic and competitive advantages.Closing is expected later this calendar year, subject to regulatory approval.

To finance the investment, Walmart intends to use a combination of newly issued debt and cash on hand. Upon closing, Flipkart’s financials will be reported as part of Walmart’s International business segment.

With the investment, Flipkart will leverage Walmart’s omni-channel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while Flipkart’s talent, technology, customer insights and agile and innovative culture will benefit Walmart in India and across the globe.

Talking about Indian e-commerce market, McMillon said, “India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market.”