Walmart Takes 77% Stake in Flipkart for $16 Billion

Retail giant Walmart Inc. (NYSE: WMT) announced Wednesday morning that it had pulled the trigger on a deal to acquire a controlling stake in India’s Flipkart Group, the country’s leading e-commerce platform. Walmart acquired a 77% stake in Flipkart for approximately $16 billion, which the company plans to fund through a combination of new debt and cash on hand.

Current stakeholders in Flipkart that will retain their positions include co-founder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft Corp. (NASDAQ: MSFT). Softbank Group is selling its 20% stake in Flipkart for about $4 billion. Softbank paid $2.5 billion for its share of Flipkart.

The acquisition gives Walmart a significant position in the last huge market left that is not dominated by another company by blocking Inc. (NASDAQ: AMZN) and Alibaba Group Holding Ltd. (NYSE: BABA) from gaining control of Flipkart.

Walmart CEO Doug McMillon said:

India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market. As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market.

Bansal, who is also Flipkart’s group CEO, said:

This investment is of immense importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India. While eCommerce is still a relatively small part of retail in India, we see great potential to grow. Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and eCommerce to the fore.

In its announcement, Walmart said that it is talking to other potential investors who may join in what is being treated as a venture funding round. If other firms — Alphabet Inc. (NASDAQ: GOOGL) has been mentioned specifically — join in the funding round, then Walmart’s stake will drop but, the company said, Walmart “would retain clear majority ownership.”

Walmart expects the acquisition to have a negative impact of $0.25 to $0.30 a share in the 2019 fiscal year that ends in January and a negative impact of approximately $0.60 a share in the 2020 fiscal year. The estimates assume the deal closes by the end of the second quarter of this calendar year.

Shares were taken down by more than 4% in Wednesday’s premarket, trading at $82.15 in a 52-week range of $73.13 to $109.98. Walmart noted in its announcement that the Flipkart deal is not expected to affect the company’s current share buyback program.