Snapdeal-Flipkart merger comes to a halt as Azim Premji objects
According to reports, Snapdeal's merger with rival Flipkart has hit one more roadblock, which can potentially drive down the embattled firm's agreed upon valuation of $1 billion for the sale, if not jeopardize the deal completely. This impasse has risen out of discontent stemming from the family office of billionaire Azim Premji, one of the smaller investors of Snapdeal. Here's all about it.
Azim Premji's office has expressed discontent over the special payments doled out to certain shareholders, including Snapdeal's co-founders and two early backers, according to reports. Flipkart has already mentioned that all investors will have to agree to the deal terms for the merger to go through and if this hiccup is not solved, one of the preconditions of the transaction will remain unfulfilled.
The differential-payments are being frowned upon as they appear to be a ploy to satisfy Snapdeal's larger-investors and founders who have decided on the merger at a low valuation. If the deal goes through, Kalaari Capital and Nexus Venture Partners will get $60 million along with equity in Flipkart and Kunal Bahl and Rohit Bansal, the two founders will get a combined $30 million.
In a letter to the Snapdeal board, PremjiInvest said that the $90 million, that's been given to the chosen group of early investors and founders, is unacceptable; while the $30 million proposal, by Snapdeal board as special payments for its employees, is fine. SoftBank, the largest shareholder in Snapdeal, has been pushing the sale aggressively but Premji's objection puts it on hold for now.
According to reports, queries regarding this matter via emails to SoftBank, Snapdeal and Kalaari Capital went unanswered and PremjiInvest declined to comment, citing that the matter is 'confidential' in nature. Now, it remains to be seen how Snapdeal and SoftBank manage to overcome this particular hurdle and whether there will be more twists and turns in future for this already delayed merger.