Priyanka Sahay
Moneycontrol News
Bringing some certainty to months of discussions, Softbank-backed e-commerce firm Snapdeal has finally agreed to a non-binding letter of intent (LoI) for a merger with rival Flipkart, according to a source privy to the development.
Technically, the LoI has formalized a preliminary agreement for the deal even as negotiations go on within the Snapdeal board. A letter of intent or an LoI is usually signed to sketch the contours of the deal which is then followed by due diligence and other procedures.
"The due diligence will start next week with some Flipkart executives coming to (Snapdeal's) office and warehouses," said the person quoted above.
The deal, which has been in works for last few months, was stuck due to disagreement amongst stakeholders over final settlement for the company's earliest investors namely Kalaari Capital and Nexus Venture Partners.
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"All the stakeholders have now given their nod to the deal," the person quoted above said.
Snapdeal's board consists of seven seats of which four are held amongst Softbank and cofounders Kunal Bahl and Rohit Bansal. One seat each is held by Kalaari Capital, Nexus Venture Partners and an independent director.
An email query to Snapdeal and Flipkart did not elicit any response on the issue.
The differences among the founders and the investors were also clearly visible recently when Kunal Bahl in an email addressed to the employees indicated that the investors of the company were driving the decisions on the way forward and founders had little control over immediate developments at the company.
Snapdeal, which was valued over USD 6 billion during its last funding round in February last year, is struggling to get even USD 1 billion valuation through this deal.
Besides Flipkart, online payments and e-commerce firm Paytm was also in the race to acquire Snapdeal during the early days of discussion. Paytm, however, soon pulled out on valuation issues. However, Paytm is expected to be in talks with Snapdeal-owned wallet firm Freecharge, in a separate deal, as per reports.
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