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After a long wait for what was inevitable, it is finally happening, Softbank and Flipkart have finally succeeded in their mission – ‘Snapdeal Merger’. E-commerce firm Snapdeal’s largest shareholder Softbank, which has been pushing for a consensus on the company’s board for its sale to Flipkart, has managed to convince early investor Nexus Venture Partners in this regard, a person aware of the development confirmed.
According to reports, Flipkart will be merging the Snapdeal entity at a valuation of just USD1 Bn. At the start of this week Snapdeal had agreed to sign a non-binding Letter of Intent (LoI) for the merger. A non-binding term sheet signifies that at the end of the due diligence, Snapdeal Board as well as Flipkart can walk away from the deal without any obligations. The deal is expected to get signed in the coming week. Snapdeal co-founders Kunal Bahl and Rohit Bansal are likely to receive USD 30 million in cash each from Softbank after their exit from the company.
Even after Softbank, which is the largest shareholder in the company, gave the final approval to the proposed merger, the deal could not materialize at that time as investor Nexus Venture Partners refused to settle on the valuation. But after a few days as Nexus came onboard with the sale of Snapdeal, Softbank has said that it suffered a loss of USD 1 billion on its investment in Snapdeal during 2016-17, almost matching the money it put in the home-grown marketplace.
Over the last few months, the company has also witnessed massive voluntary attrition. While the exact number of the employees in the company could not be ascertained, the company’s headcount is expected to be below 2,000 people as of now. There was no immediate clarity on whether or not the existing or former employees who have vested ESOPs in the company would be entitled to any benefit through this deal. Around 2,500-3,000 current as well as former employees hold close to 5-6 percent stake in Snapdeal in terms of ESOPs.
Nexus first invested in Snapdeal in January 2011 during its Series B round via its Nexus India Direct Investments II fund. Nexus invested six more times, participating in Snapdeal’s Series C, D, E and E1 rounds. Additionally, a separate fund named Nexus Opportunity Fund invested in Snapdeal’s Series E round. In total, Nexus invested Rs 210 crore in Snapdeal from 2011 to 2014, picking up a stake of around 10%.