Snapdeal starts due diligence for ShopClues

Snapdeal starts due diligence for ShopClues

Bengaluru, May 22: Online marketplace Snapdeal has started a due diligence process to acquire rival ShopClues in what will be an all-stock deal between the two companies, said three sources familiar with the development. Snapdeal is also exploring a capital raise at a valuation of about $2 billion, which could be aided by the acquisition.
The move comes in a market dominated by American retail majors Amazon and Flipkart, where Walmart owns 77% stake. Snapdeal had seen a significant churn after its merger talks with Flipkart fell through in 2017.
“The due diligence process for the acquisition started a few weeks ago,” said one of the sources mentioned earlier. PWC is one of the consultants working on the diligence.
The exact counters of the merger could not be ascertained, but valuation of both companies are expected to see significant correction from their peaks in early 2016, when Snapdeal was valued at $6.5 billion and ShopClues at $1.1 billion. The talks for the capital raise are in early stages and can help Snapdeal — which was valued below $100 million during acquisition by promoters of shares held by Kalaari Capital and Bessemer last year — benchmark a new valuation, added the sources.
A Snapdeal spokesperson declined to comment and ShopClues said it does not “comment on market rumours.”
The two companies, both based out of Gurgaon, have explored a deal multiple times in the last two years but this time the talks have progressed the farthest. Both Snapdeal and ShopClues also count venture capital firm Nexus Venture Partners as a common shareholder.
If the transactions go through, they could mark a turnaround for Snapdeal and the company’s co-founders Kunal Bahl and Rohit Bansal’s ‘Snapdeal 2.0’ strategy of building a profitable business, which is not competing for marketshare against Flipkart and Amazon India.
Snapdeal, which counts Japan’s SoftBank as its biggest backer, had seen its valuation rise to $6.5 billion by early 2016. But the company started losing market share that year, slipping behind Amazon India to become the third-largest player. In 2017, SoftBank tried to engineer a merger with Flipkart, which pegged Snapdeal’s valuation at $1 billion. But it was called off after over six-seven months of discussions. SoftBank then decided to back Flipkart, and Snapdeal’s daily shipments during the process fell by 80% to 20,000-30,000 a day.