Snapdeal an India-based e-commerce company backed by several corporates, has rejected a takeover offer from domestic competitor Flipkart in order to restructure its business.
Flipkart had reportedly bid between $900m and $950m for the company, which counts telecommunications group SoftBank, media company Bennett, Coleman & Co (BCC), chipmaker Intel, e-commerce firms eBay and Alibaba, contract manufacturer Foxconn, and mobile software provider Myriad as investors.
Founded in 2010, Snapdeal runs a diversified online marketplace for consumer goods and was valued at $6.5bn to $7bn, as of a $200m funding round featuring BCC, Ontario Teachers’ Pension Plan, Iron Pillar and Brother Fortune Apparel in February 2016.
However, a lengthy battle with Flipkart and US-based Amazon took its toll and, with Snapdeal unable to break into profit, key investor SoftBank withdrew debt financing in April 2017 and attempted to broker an acquisition by Flipkart.
Negotiations were seemingly fraught from the start, with numerous investors and board members reportedly unable to agree on valuations or compensation figures. Snapdeal’s board reportedly accepted an offer and were set to seek approval from its other shareholders.
Reports surfaced last week that Snapdeal’s founders had got cold feet and were favouring an option that would enable them to remain at the company. That seems to be the case, according to a company statement announcing the decision, along with plans to create ‘Snapdeal 2.0’.
A spokesperson told News 18 in an emailed statement: “Snapdeal has been exploring strategic options over the last several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result.”
The statement claimed that following restructuring, Snapdeal had posted a gross profit last month and expects to be self-sustaining once it has divested certain non-core assets. The first of those, digital payment platform FreeCharge, was sold to financial services firm Axis Bank for $60m last week.
The decision will prove frustrating for Japan-based SoftBank, which reportedly owns about 30% of Snapdeal, and which may well decide now to simply invest in Flipkart directly as it seeks a larger share of India’s e-commerce sector.
A SoftBank spokesperson said: “We respect the decision to pursue an independent strategy. We look forward to the results of the Snapdeal 2.0 strategy, and to remaining invested in the vibrant Indian e-commerce space.”
Snapdeal has raised about $1.7bn in funding and its investors also include Kalaari Capital, Nexus Venture Partners, BlackRock, Temasek, Ru-Net, Saama Capital and Bessemer Venture Partners.