Walmart announced earlier this week that it will pay $16 billion for a roughly 77 percent stake in Flipkart in what is the USA retail giant's largest-ever deal and to beat the foremost rival Amazon.com Inc (AMZN.O) in a key growth market.
At USD 20.7 billion valuation, the USD 3 billion investment can get less than 15 per cent stake.
Moreover, Bentonville, Arkansas-based United States retailer said in the filing that it has the right to appoint or change chief executive or other principal executives of the country's largest e-commerce company.
The filing also says that there are no termination fees linked to the deal.
Walmart or its components could question Flipkart to issue new common shares of up to 3 billion until the closing of their "transactions and before or on the very first anniversary of their final", it also said. A majority of Flipkart's minority shareholders also have a right to take the company public four years after the deal is completed, at a valuation higher than what Walmart has paid in this transaction.
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Walmart acquired more than 70 percent stake in Flipkart recently putting an end to all speculations and rumors.
"Immediately after the closing of the transactions, all Flipkart preference shares will convert into ordinary shares", Walmart said.
Apart from outlining Flipkart's IPO plans, Walmart also detailed other clauses of its shareholding agreement, including the constitution of the Flipkart board for the next two years.
Walmart's additional share purchase, if made, will be at the same price at which it made the initial investment, the filing said.
Flipkart's board of directors, it said, would initially have eight members, five of which would be appointed by Walmart, two by certain minority shareholders, and one would be Binny Bansal.
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The US retail major said it may appoint or replace the chief executive and other principal executives of the Flipkart group of companies, subject to certain consultation rights of the board and the founder.
Meanwhile, sources with direct knowledge of the development said that Japan's SoftBank has not yet chose to sell its 20-22 per cent stake in Flipkart to Walmart.
Once Walmart owns more than 85 per cent of Flipkart, several rights of minority shareholders, including Tiger Global, Binny Bansal, Microsoft, Tencent and others, will be revoked such as their veto right to "prevent certain significant transactions or other events involving Flipkart", their right to refusal and even their "drag along" rights. Sources, however, said SoftBank is yet to take a call on exiting Flipkart.The factors that hold key to the decision include the tax SoftBank has to pay on profits it would earn from such share sale. Currently, SoftBank retains about 22 per cent in Flipkart, according to the ToI report.
This is published unedited from the PTI feed.
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