The Bentonville, Arkansas-based company earlier this week said it had agreed to pay $16 billion for about 77% stake in Flipkart, a deal that will help it to take on its arch rival Amazon in India's online retail market.
This would be done at a valuation no less than that paid by Walmart under the share issuance agreement. The deal is expected to close by the end of this calendar year.
At any time after the closing of the transactions and on or before the first anniversary of the closing, the purchaser, or any of its affiliates, may request that Flipkart issue additional ordinary shares with an aggregate purchase price of up to Dollars 3 billion, it said.
Walmart, while signing the deal, stated that the remainder of the business will be held by some of Flipkart's existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp.
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Walmart may take Flipkart public in as early as four years, the company has disclosed in a US SEC filing.
Walmart said it can, in future, reconstruct a board member together with the approval of the majority of those Flipkart supervisors.
Though with time Walmart will appoint six directors with the consultation of all the majority Flipkart directors now it has been made clear in the deal that Walmart will initially appoint five directors to Flipkart's board, two directors will be named by minority shareholders while Bansal will take one board seat.
Walmart's filing also said it might appoint or replace chief executive officer and other principal executives of the Flipkart group of companies, subject to certain consulting rights of the board and the founder. In fact, the Beast of Bentonville had also said that it hoped to meld Flipkart's numbers into the revenues of Walmart's global operations by the end of the second quarter and had suggested that might impact the company's earnings per share by up to 30 U.S. cents.
"Shareholders agreement would expire upon the consummation of the IPO, whether initiated by the board or the minority stockholders", it added.
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For Walmart, the acquisition opens a new front in its battle with Amazon, which had expressed interest in making a competing offer for a stake.
The veto rights for the Minority Shareholders will expire if Walmart owns 85% of the outstanding shares of Flipkart.
Walmart and other significant minority shareholders - it didn't spell out who - will also have the right of first refusal on transfer of Flipkart shares along with co-sale rights in certain situations. Also, at this present juncture, Walmart's filing is vital when Flipkart's main stakeholder, Tokyo-based SoftBank, is yet to make up its mind about the sale of its shares. "If the drag along right is exercised, each minority shareholder must be entitled to sell all of its shares in the proposed transaction", the filing added.
Even the financial Times newspaper reported Friday, citing unnamed sources, that Japan's SoftBank team, that owns a roughly 20 per cent stake in Flipkart, has been devoting its exit because to tax obligations since it observed farther price in Flipkart.
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