Walmart is expected to announce the purchase of a majority stake in Indian e-commerce company Flipkart later this week, despite reports that rival Amazon tried to disturb the transaction.
The US grocery giant has agreed the purchase of 75% of Flipkart to about $15bn (£11bn), according to numerous media reports.
The two companies first held talks in 2016.
Amazon, Flipkart the main rival in India’s fast-growing online retail sector, is also said to have bid.
Flipkart, which was founded in 2007, claims over 100 million registered users, and says it facilitates more than 8 million shipments each month.
The company has already attracted the attention of some high profile investors, including Microsoft, Tencent and Softbank, despite the publication of losses.
A combination with Walmart could be controversial, however. Some groups in India have already expressed concerns about how a deal might affect smaller retailers, the Times of India and other have reported.Why is Walmart concerned?
India is seen as the next big frontier for online shopping, with the e-commerce market expected to grow by almost a third this year to about $50bn, according to some estimates.
Walmart has refused to comment on reports that Flipkart, an agreement to go forward, but the grocery giant has tried to expand into India for years. The studio is flush with the savings of a new tax cut.
“China and India certainly have the potential to be very big growth markets for us, when you figure more than a third of the world’s population lives in those two countries. Who can continue to be great opportunities for us for the future”, Brett Biggs, the company’s head of investor relations, said at a conference in the month of March.
The us firm currently operates 21 wholesale shops in India, but was run against the rules of the government about foreign ownership in the retail sector. A previous joint venture that was completed in 2013.
How would the deal fit in the Walmart strategy?
Walmart is putting resources fighting a tough battle against its online competitors, not cheaper than Amazon.
It has bought e-commerce company Jet.com and has announced partnerships with companies such as Google, and China JD.com.
Moving away from the concept that focuses only on physical points of sale, the company formally dropped the word “store” from its name last year, and later said it would close about 10% of its Sam’s Club discount.
In the UNITED kingdom, the company recently announced plans to merge with Asda, which it purchased in 1999, with Sainsbury’s. It is also reportedly looking to sell part of its Brazilian operations.
All of this leaves your hands free to deal more effectively with Amazon.Did Amazon try to muscle in on the deal?
Amazon would have made its offer for a majority share of Flipkart, talks with Walmart reached an advanced stage.
Indian business channel CNBC TV18 said that Amazon had offered to buy about 60% of Flipkart, in an offer that was “probably equal” with Walmart.
Amazon had already been focusing on expansion in India, and in 2016, has committed to invest more than $5 billion. However, analysts said that an agreement with Flipkart would have raised competition concerns and expressed skepticism about the likelihood of a late-in-the-day bidding war.What is in it for Flipkart?
Flipkart founders and many investors, reported to promote the link with Walmart, which provides a way for current supporters to sell their shares.
A major round of investment last year, with values Flipkart at around $11.6 billion; Walmart, if the press reports are accurate, the values the company at about $20 billion.
Walmart also leads to the combination of expertise in areas such as the food, said Satish Meena, senior forecast analyst at Forrester.
He said: “For Flipkart, it is much more than just money ….With Amazon to bridge the gap in other categories of fashion, Flipkart needs to Walmart to remain competitive in the long term.”