Snapdeal's sale to Flipkart witnesses delays on complex due diligence process, small investors concerns

 Highlights:  

1. The sale of Snapdeal to Flipkart is expected to conclude sometime in July this year  

2. Flipkart is expected to pay slightly less than its preliminary offer of $1 billion to buy out Snapdeal 

The sale of Snapdeal to homegrown e-commerce major Flipkart is witnessing delays on account of complex due diligence process and small investors asking greater clarity on its terms of sale, according to media reports.

Japan's telecom and internet company SoftBank, which is the largest shareholder in Snapdeal, was expected to conclude its sale to Flipkart by June this year but it is likely to get delayed by another month, The Economic Times reported.

Recently, one of the Snapdeal's small investor PremjiInvest a personal investment arm of Wipro's chairman and billionaire Azim Premji, had written a letter to the Jasper Infotech board, which runs Snapdeal, cited the news report quoting three people familiar with the development, as saying.

In its letter to Jasper Infotech, PremjiInvest has outlined its concerns over the transaction, which aims to close the sale of Snapdeal to its Bengaluru-headquartered rival for $700 million-$1billion.

“Of course, the smaller shareholders are not happy since they want a larger exit payout—but they have no power to hold up the deal. The sale will go through irrespective of whether the smaller investors are on board or not,” Livemint reported quoting a person familiar with the development, as saying.

The Economic Times news report citing a person familiar with the matter said that PremjiInvest is also building consensus among other investors, who also hold small stakes in Snapdeal, including Singapore's sovereign wealth fund Temasek and asset manager BlackRock, to potentially oppose special payouts to certain shareholders.

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Such payouts are expected to be made to early investors like Nexus Venture Partners and Kalaari Capital, besides company founders Kunal Bahl and Rohit Bansal, the person told the newspaper.

In May, Vani Kola, the managing director of Kalaari Capital, resigned from the board of Snapdeal. Nexus Venture's Suvir Sujan, Bahl and Bansal still hold seats on the board of the company.

However, Snapdeal’s sale to Flipkart is on track despite the delay with the due diligence process, Livemint reported quoting the two people familiar with the matter, as saying.

The deal is expected to conclude sometime in July, they added. The due diligence process had started last month, cited the Livemint news report.

The process of going through the details of Snapdeal’s books and its various subsidiaries has proved to be more complex than anticipated, said both the people to Livemint.

It said that some experts tracking the sale talks have questioned the viability of this deal for Flipkart, which will have the added burden and distraction of integrating Snapdeal months after it bought out eBay’s India business amid a bruising tussle with deep-pocketed rival Amazon India.

Snapdeal is the largest investment for Kalaari and Nexus, and a bad deal could be damaging for the two home-grown venture capital firms.

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