Walmart said it may elect to ask Flipkart to issue shares worth Dollars 3 billion within a year of close of transaction but did not clearly say if the investment would be brought in by it or a new partner. "No termination fee would be payable if the share issuance agreement or the share purchase agreement were terminated", Walmart said in the filing.
Walmart or its components could question Flipkart to issue new common shares of up to 3 billion until the closing of their "transactions and before or on the very first anniversary of their final", it also said.
United States retail giant Walmart is looking to retain Flipkart co-founder Binny Bansal and other minority investors such as Tiger Global for at least four years, promising that it will protect the valuation of their shareholding and offer them the potential upside of taking the company public.
Minority investors holding 60 percent of Flipkart's stocks "acting collectively, may necessitate Flipkart to effect an initial public offering" (IPO) 4 decades after the beginning of their Walmart Flipkart transaction, " the Bentonville, " Arkansas-based retailer said at a May 11 filing with an U.S. Securities and Exchange Commission.
"As Flipkart is expected to generate meaningful losses for at least the next few years, this is clearly an investment for the future", said Charlie O'Shea, VP and Lead Retail Analyst at Moody's in commentary provided to Retail TouchPoints.
These include five Walmart-appointed directors; two appointed by certain minority shareholders; and one 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 United States cents.
The US retail major said it may appoint or replace the chief executive and other principal executives of the Flipkart group of companies, subject to certain consultation rights of the board and the founder.
As reported earlier, Flipkart may opt for an initial public offering (IPO) post four years of the deal closure at a valuation no less than what was paid by Walmart.
The remaining positions will be taken up by Flipkart founder Binny Bansal and two remaining directors to be appointed by certain minority shareholders.
Among other transfer restrictions and subject to certain exceptions, transfers of Flipkart shares will be subject to a right of first refusal exercisable by Walmart and other significant Minority Shareholders, and in certain situations, co-sale rights. These rights will, however, expire if Walmart increases its stake to 85% or more, the retail giant noted in the filing. "When viewed in tandem with the recently-announced sale of a majority stake in Asda, is indicative of Walmart's long-standing strategy of shifting resources into higher growth potential markets and segments when opportune". "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. Here's what will happen in Flipkartm, if Walmart acquires 85% stake.
The Economic Times newspaper reported on Friday, citing unnamed sources, that Japan's SoftBank Group, which owns a roughly 20 percent stake in Flipkart, was rethinking its exit due to tax liabilities and because it saw further value in Flipkart.