Update: Walmart closes deal for Flipkart

This article was updated May 7.

Walmart has finalized a deal to acquire a majority stake in India e-commerce leader Flipkart Online Services Pvt.

Flipkart’s board has approved an approximately $15 billion agreement to sell a 75% interest in the company to a Walmart-led group expected to include Google parent Alphabet Inc. 

Also under the proposal, Flipkart investor Softbank Group Corp. is slated to sell its 20% stake for about $20 billion, according to a Bloomberg report.

With this deal, the U.S. retail giant has thwarted rival Amazon.com Inc., which had reportedly made a bid valued at $22 billion to $23 billion for a 60% share of Flipkart, eclipsing an earlier proposal by Walmart of around $20 billion for a 60% stake. In a sign of the high stakes involved, Amazon offered a $2 billion breakup fee to Flipkart to discuss a deal, published reports said.

“The e-commerce market in India holds tremendous promise. Several e-commerce giants like Amazon and Walmart are leaving no stone unturned to make the most of it. Interestingly, this has led to fresh contention between the retail bigwigs over the Flipkart deal,” Zacks Equity Research said in an analysis released yesterday.

Industry observers note that Walmart holds an edge in the battle due to antitrust concerns. Amazon already is the No. 2 online retail player in India, and regulators might frown on a combination with Flipkart — a situation that may have swayed Flipkart’s board in the direction of a deal with Walmart.

“The combination of Amazon and Flipkart will create a monopoly in Indian e-commerce market, which might not get regulatory approval in India,” Zacks wrote.

As in China, the Indian market is coveted by online retail players. Citing figures from the India Brand Equity Foundation, Zacks reported that the Indian e-commerce market is project to grow from $38.5 billion last year to more than $50 billion this year, reaching $200 billion by 2026.

Fueling the bullish outlook for online retail in India is exploding growth in internet and smartphone use and ongoing digitalization, according to Zacks. That is expected to help propel the online shopping market in India, which is forecast to grow 31% to $135.8 billion in 2018.

Walmart and Amazon, though, will have to face off in the Indian market with another huge online retail player: China’s e-commerce leader Alibaba. Zacks noted that Alibaba already has made sizable e-tail investments in India and is looking to expand further, including in online grocery and food ordering.