Walmart likely to take Flipkart public in as early as 4 years

Doug McMillon CEO of Walmart Inc. Adam Jeffery  CNBC  Getty Images

Walmart Inc, the world's largest retailer, could be forced to publicly list its newly acquired Indian e-commerce company, Flipkart Group, within four years at the request of a small minority of Flipkart shareholders, a public filing shows.

In the run up to deal, it was speculated that Walmart may partner Google parent Alphabet for the Flipkart acquisition.

Elaborating on the deal, Walmart Inc said the Flipkart board will initially have eight directors: five Walmart-appointed, two appointed by certain minority shareholders and one founder.

Minority shareholders after the deal include co-founder Binny Bansal, China's Tencent Holdings, U.S. hedge fund Tiger Global Management and Microsoft Corp.

JAPAN'S SoftBank Group Corp has not yet made a decision to sell its 20-22 per cent stake in Flipkart to United States retailer Walmart Inc, sources with direct knowledge of the development said. However, two board appointees of Walmart will be independent members, the filing noted.

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 United States dollars 3 billion, it said.

Walmart will purchase ordinary shares issued by Flipkart for an aggregate purchase price of $2 billion in cash (the "Share Issuance").

There are several situations under which the agreement can be terminated: the failure to win regulatory approval from the Competition Commission of India; material adverse change in Flipkart's business; inaccuracy of representations and warranties, and performance of covenants; and governmental or shareholder litigation challenging either of the share issuance or secondary share purchase transactions.

There are other investors who give their holding away to Walmart are - Accel India with 6.4%, eBay with 6% stake and others 6.21% stake.

Moreover, holders of 40 per cent of Flipkart shares held by the minority shareholders - or a combine holding of 9.2 per cent of the total equity - will be able to veto "certain material, non-arms' length transactions between Flipkart and Walmart".

Walmart also mentioned no celebration would be responsible to pay a termination fee if a share issuance or invest in arrangement with Flipkart were also terminated. The price at which Walmart bought Flipkart stake has not been disclosed, and different tranches could have been purchased at different prices. The right of first refusal for the Minority Shareholders will expire if Walmart owns 85% of the outstanding shares of Flipkart.

"Shareholders agreement would expire upon the consummation of the IPO, whether initiated by the board or the minority stockholders", it added. SoftBank's Masayoshi Son will take a call in the next 7-10 days on whether to exit India's biggest online retailer or stay invested for some more time, they said.

Related news: