- The family office of billionaire Azim Premji, one of the early investors in Snapdeal, has written to its board objecting to special payouts for the founders and two larger investors, Kalaari Capital and Nexus Venture Partners, as part of the buy-out deal with Flipkart. This puts a spanner in the works for India’s biggest ecommerce merger, reports Bloomberg citing anonymous sources familiar with the discussions.
- Snapdeal founders Kunal Bahl and Binny Bansal along with Kalaari and Nexus had negotiated hard on compensation because Snapdeal’s proposed sale at a valuation of US$1 billion is a fraction of its peak valuation of US$6.5 billion. Kalaari and Nexus are set to receive US$60 million in addition to equity in Flipkart, while the founders get a combined handout of US$30 million, under the terms of the deal.
- PremjiInvest is objecting to differential payments, as other investors are receiving no special compensation. It has no objection to another special payment – US$30 million for Snapdeal employees.
Why it matters
- The acquisition was a bailout for Snapdeal’s stakeholders and employees as the ecommerce company lost market share to Amazon and struggled to raise funding last year. If it doesn’t go through, it puts all of them in limbo as cash runs out.
- Snapdeal’s biggest investor, SoftBank, has been pushing hard for the deal, and got the founders and other two major investors to agree to the terms after protracted negotiations. But “there can be many a slip between the cup and the lip,” as a source with first-hand knowledge of the negotiations had told Tech in Asia.
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