Flipkart's new term sheet holds Snapdeal investors liable for any wrongdoing in firm

Flipkart

Flipkart’s revised term sheet which values Gurgaon-based Snapdeal around USD 850 million, has several clauses and hold-backs including imposing legal liability on board members post deal, two people privy to the matter told Moneycontrol.

The new term sheet contains a clause asking the stakeholders to remain liable to whatever happens in Snapdeal even post the merger for at least 18-24 months.

The revised term sheet also has a clause that says that Flipkart will hold back about USD 150-200 million, which will come to Snapdeal only after a specified period. In a sense, after the merged entity is convinced of no trouble brewing due to the merger.

Following resistance from co-founders of Snapdeal to Flipkart’s term sheet clauses, the company board has decided to let all the stakeholders take a call on whether to accept the offer or not, three people privy to the development confirmed to Moneycontrol.

The company has around 25-28 stakeholders, which includes investors such as Premji Invest, Foxonn, Tencent, Blackrock and Ontario Teacher's Pension Fund.

“The discussion to allow all the stakeholders to have a say on the issue had been going on since the last few days. It came to light after the minority stakeholders started questioning the payouts promised to the majority stakeholders,” said one of the persons quoted above.

Last month, the family office of billionaire Azim Premji had reportedly objected to special payouts to select stakeholders including the two Snapdeal founders.

“Flipkart anyways wanted all stakeholders to agree before going ahead with the deal. This just follows that module. The only difference is that there is no consensus at the board level right now,” said another person.

The sale and purchase agreement will be now circulated to all stakeholders who will then take a call on the deal.

Founders Kunal Bahl and Rohit Bansal have been pushing for alternative paths – either a merger with listed e-commerce firm Infibeam or going ahead solo with a Plan B, which the company has been working on for a few months now.

The term sheet mentioned above is the second one that has from Flipkart. While it talks about a lot of terms and conditions, it doesn’t mentions any reason behind these reservations, allegedly irking the founders even more.

Bahl and Bansal have been conducting one-on-one meetings with senior executives including heads of multiple business units to firm up their plans for an alternative path, hinting their reluctance to go ahead with a deal with Flipkart.

Snapdeal received two offers from Flipkart for an all-stake acquisition in July.

While the first one USD 550 million was way below the e-commerce firm's expectation of USD 1 billion, the second offer of USD 850 million came last week.