Reuters ran an exclusive report Friday where two sources familiar with the discussions said that Walmart (NYSE: WMT) is in talks to buy a stake of more than 40% in Indian e-commerce firm Flipkart, a direct challenge to Amazon (NASDAQ: AMZN) in Asia’s third biggest economy.
In what would be one of the retail giant’s largest overseas deals, the U.S. retailer is considering buying new and existing shares in Flipkart. According to the sources, due diligence is likely to begin as early as next week.
The terms being discussed weren’t immediately available, but Flipkart would be valued at more than the $12 billion figure given last year when SoftBank’s Vision Fund bought roughly a fifth of the Amazon competitor for $2.5 billion.
The deal would be a win-win for both companies. Walmart currently has wholesale operations in India but isn’t permitted to open retail stores in the country due to restrictions on overseas investments in multi-brand retail. Walmart’s investment negotiations with Flipkart, however, do include a proposal to open a chain of retail stores according to Economic Times.
Flipkart, meanwhile, has been looking to buy retail chains to take on U.S. rival Amazon, and a deal with Walmart would give it some much-needed muscle.
While Walmart is negotiating to buy a stake of as much as 40%, the deal is likely to result in only 20% as there will be objections from Flipkart’s investor SoftBank which holds a 20.8% stake in the Indian company.
Amazon has committed to investing $5 billion in India as it aggressively expands, including into grocery deliveries, which analysts site as the next battleground for the country’s e-commerce sector.
In addition to its own e-commerce site, Flipkart owns fashion portals Myntra and Jabong, and controls roughly 40% of India’s online retail landscape, according to research firm Forrester. The company is also considering expanding into grocery deliveries to compete with Amazon.
“Walmart’s expertise in selling groceries and low-cost apparel could help Flipkart remain ahead in India’s e-commerce market,” said Satish Meena, a senior analyst at Forrester.
Flipkart was founded by two former Amazon employees, Sachin Bansal and Binny Bansal, in 2007 in India’s tech hub, Bengaluru.