Earlier this week, Walmart announced that it would buy 77% stake in Flipkart for $16 billion at a valuation of almost $21 billion.
"Holders of 60 per cent of the Flipkart shares held by the minority shareholders, acting together, may require Flipkart to effect an initial public offering following the fourth anniversary of closing of the transactions at a valuation no less than that paid by Walmart under the share issuance agreement", the filing read. Walmart announced earlier this week that it will pay $16 billion for a roughly 77% stake in Flipkart in what is the USA retail giant's largest-ever deal and a move to take on arch rival Amazon.com Inc.in a key growth market.
Flipkart board will have co-founder Binny Bansal, who has chose to stay on, as well as two directors from other minority shareholders that includes Tencent Holding, Tiger Global and Microsoft Corp. The Flipkart share purchase deal is expected to close by 9 March, 2019.
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According to the filing, Walmart or its units could ask Flipkart to issue new ordinary shares of up to $3 billion before the close of the "transactions and on or before the first anniversary of the closing".
Following the acquisition, the Flipkart board will initially have eight directors with five being appointed by Walmart, two being appointed by certain minority shareholders and one Flipkart founder (Binny Bansal).
A Morgan Stanley study past year mentioned that increasing internet and a boom in smartphone adoption, in addition to rapid economic growth, could make India's bourgeoning e-commerce sector worth United States dollars 200 billion by 2026. The USD 500 billion retail titan has disclosed in a US SEC filing that it might take Flipkart public in as early as four years.
The minority shareholders of Flipkart will be able to exercise a conditional right of veto over "specified decisions relating to Flipkart's business and activities", the filing said but did not spell out the details.
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"Shareholders agreement would expire upon the consummation of the IPO, whether initiated by the board or the minority stockholders", it added.
In case, SoftBank decides not to sell, Walmart would be left with about 55 per cent of Flipkart. Flipkart board chose to ink a deal with Walmart because it will provide long-term growth and fuel competition.
Walmart said the number of directors may be increased to nine at any time. Flipkart's other co-founder Sachin Bansal had exited the company earlier this week, by selling his 5.5% stake for about $1 billion. If this happens, then Walmart's shareholding in the Indian e-tailer could go up by a further 12-14 per cent, pushing its shareholding beyond 85 per cent.
It said 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.
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