Walmart's impending purchase of a controlling stake in Flipkart will include about $2 billion of new equity funding and the entry of internet giant Google as a key shareholder, in what will be the American retail giant’s biggest acquisition to date in the ecommerce space.

Walmart will buy up to 75% in Flipkart for $15 billion, valuing the Indian ecommerce company at $20 billion, said multiple people familiar with the matter. The acquisition, which could be announced as early as Wednesday, will be funded with existing cash reserves and new debt, they said.

Walmart’s CEO Doug McMillion will be in India to close the Flipkart deal, said sources.

Walmart is expected to hold a majority stake in the combined entity, but the American retailer and Singapore-based Flipkart are in talks with other potential investors to raise funds. That will pave way for Google to come on board as a new shareholder in Flipkart and the exit of Softbank, as reported earlier by CNBC-TV18.

Flipkart’s current leadership team including Binny Bansal and Kalyan Krishnamurthy will remain in their current roles after the deal, said sources.

Sachin Bansal, Flipkart co-founder, would exit the company after the Walmart deal is sealed and will explore new opportunities, added sources.

Other investors too could participate in raising funds after the acquisition is closed, and Flipkart's financials will be reported as part of Walmart international, said the people quoted above.

Flipkart will look to leverage Walmart’s retail expertise and its knowledge of the grocery and merchandise supply chain management. The investment by Walmart will help the Indian company build retail infrastructure especially in rural India, and also set up and agricultural supply chain.

Flipkart and Walmart will operate distinct brands after the deal is closed. Flipkart runs fashion portals Myntra-Jabong, a payments unit called PhonePe and logistics company Ekart.

Walmart, however, sees headwinds on its per-share earnings after the deal.

The company is expected to take Flipkart public and make it a majority-owned subsidiary in a few years.

The deal will give Flipkart’s sellers an opportunity to access Walmart’s global supply chain.

The Walmart will provide Flipkart’s private label brands global access and the retail giant will use Flipkart to boost its b2b ecommerce plans.

Going forward, the deal is likely to add food delivery, which is not a part of Flipkart's platform.

Flipkart was founded in 2007 by Sachin Bansal and Binny Bansal, both former Amazon employees.

The founders, who are not related, as well as early investors Tencent and Tiger Global will be represented on the Flipkart board. Walmart, Tencent, Tiger Global as well as Google are also expected to back Flipkart's team, the persons added.

Amazon had emerged as new contender for Indian e-commerce giant Flipkart. The global etailer had made a formal offer to buy a 60% stake in Flipkart on Monday.

First Published:May 8, 2018 9:11 AM IST