Snapdeal may merge with Infibeam to create $2 billion company

MUMBAI: The country's only publicly listed e-commerce company Infibeam is involved in merger talks with troubled online marketplace Snapdeal, sources close to the matter said. The development comes at a time when Snapdeal's board rejected a $700-750 million offer for sale to Flipkart last week. However, a revised offer of $900-950 million may be on the anvil, as we reported in our July 13 edition.

Infibeam has put in a term sheet, which is likely to value Snapdeal at $1billion, a source privy to the deal talks said on the condition of anonymity.

A term sheet is a non-binding agreement that puts together the terms and conditions under which an investment will be made. The Ahmedabad-based Infibeam, which has a market capitalisation of around Rs 6,100 crore, will create a combined $2-billion entity when merged with Snapdeal. If it goes through, this deal will not include Snapdeal's logistics business Vulcan Express and payments platform Freecharge.

"While Infibeam has a focus on business-to-business commerce, Snapdeal's is a consumer-led online retail platform which is why this merger may bring in synergies in their operations. While Infibeam has given a term sheet, it's not the end of the road for Flipkart," another person close to the deal said. Both the players can cross-sell their products as their merchants are largely dif ferent, the source said.

There are three options for Snapdeal as things stand right now-close a deal with Flipkart, merge with Infibeam or sell its assets such as Vulcan Express and Freecharge to shore up funds to stay independent. An emailed query sent to Snapdeal co-founder & CEO Kunal Bahl, and a message to an Infibeam spokesperson remained unanswered at the time of going to press.

The biggest impediment in the proposed sale to Flipkart, which was orchestrated by Snapdeal's largest investor SoftBank, has been the boardroom disagreement between majority and minority shareholders in the Gurgaon-based e-commerce company. A set of smaller investors led by PremjiInvest have objected to the preferential payments being made by SoftBank to two of the early investors Kalaari Capital and Nexus Venture Partners.

What is unclear right now is whether these fresh talks with Infibeam will get shareholder agreement once the deal comes closer to getting sealed. "This will pave the way for a clear exit for shareholders in Snapdeal as it will be merged with a public company," a source said.

On Thursday, Infibeam announced the acquisition of e-payments firm CC Avenues. From a market capitalisation of Rs 2,366 crore on the day of Infibeam's listing in April 2016, it is now valued at Rs 6,100 crore. K R Choksey Shares & Securities has a price target of Rs 1,530 for the stock -a 36% upside from its current close of Rs 1,124.