E-commerce company Flipkart agreed today to acquire Jabong, the India-based branch of fashion e-commerce holding entity Global Fashion Group (GFG), for $70m in cash.
Jabong sells a range of fashion and apparel through an online platform. It received $27.5m from UK development finance institution CDC group before e-commerce holding group Rocket Internet, GFG’s founder, supplied another $20m in March this year.
However, the company has not been profitable and recently announced it is changing its business model from an inventory-based structure to an online marketplace for other vendors. It was responsible for 13% of GFG’s revenue over the last financial year but 22% of its net losses.
US-based e-commerce firm Amazon entered talks in late 2014 to buy Jabong for a reported $1.2bn but balked at the valuation, and online payment company Paytm and retail conglomerate Aditya Birla were said in September 2015 to be interested, at a $500m to $800m valuation.
Flipkart, Aditya Birla, e-commerce companies Snapdeal and Alibaba, and retail firm Future Group were all reported earlier this month to be among the bidders for Jabong.
GFG’s shareholders are e-commerce holding group Rocket Internet, Tengelmann Ventures, which operates as retailer Tengelmann’s corporate venturing unit, conglomerate Access Industries, Kinnevik, Verlinvest, Summit Partners and Ontario Teachers’ Pension Plan.
Romain Voog, chief executive of GFG, said: “Through the sale of Jabong, we are achieving a milestone in our strategy to refocus and invest in our core markets that show both, significant growth and revenue potential but also a clear and predictable path to profitability.
“With a strengthened balance sheet, we are now uniquely positioned to continue investing to deliver unparalleled shopping experience and best in class service to our customers and partner brand-owners across all of our countries.”
The deal follows GFG’s announcement last week that it had closed $339m in new funding at a valuation of $1.1bn, down around two-thirds from its valuation in July 2015.