2018-05-10 10:43:19 BdST
Walmart acquires India's Flipkart for $16b
Walmart said it will pay $16 billion for a roughly 77 per cent stake in Indian e-commerce firm Flipkart, the US retailer’s largest-ever deal as it competes with Amazon.com in an important growth market.
Shares of Walmart fell 3 per cent on Wednesday. The company warned it expects the deal to reduce fiscal 2019 earnings by 25-30 cents per share if it closes in the second quarter. It also expects Indian investments to shave 60 cents per share from earnings in fiscal 2020.
Walmart’s acquisition opens a new front in its battle with Amazon, which had expressed interest in making a competing offer. Amazon holds about 27 per cent of India’s burgeoning e-commerce market, according to Euromonitor, where Walmart only operates 21 cash-and-carry wholesale stores in the country that sell to businesses, reports Reuters.
The deal probably will not do much to change market share between Flipkart and Amazon in India, said Jason Benowitz, senior portfolio manager at the Roosevelt Investment Group. In the fiscal year ended March 31, Flipkart reported sales of $4.6 billion.
Flipkart sells consumer goods ranging from soaps to smartphones and clothes, and gives Walmart access to an e-commerce market that could be worth $200 billion a year within a decade, according to Morgan Stanley.
Walmart expects the deal to help set it up “for growth and profits in the future,” Chief Executive Officer Doug McMillon said on a call with investors. McMillon has led Walmart’s efforts to boost international business.
Walmart said Flipkart’s logistics, payments, and apparel businesses offer new areas of growth.
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