After five months of countless board meetings, the proposed merger between e-commerce players Snapdeal and Flipkart has been called off, Snapdeal confirmed on Monday. The possible merger would have been the biggest consolidation in Indian e-commerce history.
"Snapdeal has been exploring strategic options over the past several months. The company has now decided to pursue an independent path and is terminating all strategic discussions as a result. Snapdeal's vision has always been to create life-changing experiences for millions of buyers and sellers across India," Snapdeal spokesperson said.
Snapdeal also revealed that it is facilitating a major layoff in the company, with an agenda to cut down 80 per cent of its employee strength.
A SoftBank spokesperson said the company would "look forward" to the results of Snapdeal's new plan. "Supporting entrepreneurs and their vision and aspirations is at the heart of Masayoshi Son's and SoftBank's investment philosophy. As such, we respect the decision to pursue an independent strategy. We look forward to the results of the Snapdeal 2.0 strategy, and to remaining invested in the vibrant Indian e-commerce space," Mint quoted the spokesperson said in a statement.
Earlier Snapdeal accepted Flipkart's revised Rs 5,800 crore ($900 950 million) buyout deal on Wednesday. The deal was pending for Snapdeal shareholders' approval.
Snapdeal now plans to go ahead with its 'Plan B' and pivot its company into a Taobao kind of an open marketplace set-up, Business Standard reported.
"We have a new and compelling direction -- Snapdeal 2.0 -- that uniquely furthers this vision, and have made significant progress towards the ability to execute this by achieving a gross profit this month. In addition, with the sale of certain non-core assets, Snapdeal is expected to be financially self-sustainable. We look forward to the support of our community, including employees, sellers, buyers and other stakeholders in helping us create a designed-for-India commerce platform," the person added.
Till date, the co-founders, as well as Snapdeal's early-stage investors, have been upset with the way SoftBank has marked the valuation to a sixth of what it was last year. Kalaari Capital and Nexus Venture Partners, the two early-stage investors, wanted SoftBank to value not just the e-commerce company, but its two units — Vulcan Express and Unicommerce — with a higher valuation.
Snapdeal's minority shareholders, in total around 30 including PremjiInvest, have also shown their displeasure about the deal and demanded a better payout, BS reported.
The company just closed a $60-million deal to sell its online wallet Freecharge to Axis Bank. With this money, as well as the cash it has in the bank, the company hopes to have a running time of at least four years.