Moreover, Bentonville, Arkansas-based USA retailer said in the filing that it has the right to appoint or change chief executive or other principal executives of the country's largest e-commerce company.
The deal, the biggest ever acquisition for Walmart, had valued Flipkart for more than $20 billion, according to sources. According to the filing, the Flipkart board will initially have eight directors, five of which would be appointed by Walmart. In fact, the Beast of Bentonville had also said that it hoped to meld Flipkart's numbers into the revenues of Walmart's global operations by the end of the second quarter and had suggested that might impact the company's earnings per share by up to 30 United States cents.
The agreement provides for a "contemporaneous" issuance of fresh shares for an aggregate value of $2 billion and the purchase of shares held by a slate of existing shareholders for a value of $14 billion.
Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said the infusion in itself is a significant measure of confidence that Walmart has, "that Flipkart is something which needs to be supported not only in terms of integrating it into the Walmart business but also as an independent [business]", said Mr. Dutta. The IPO should be done at a valuation no less than that paid by Walmart under the share issuance agreement, subject to the satisfaction of other conditions regarding such offering.
If Walmart proposes to transfer a sufficient number of Flipkart shares such that, following the transfer, it would no longer control a majority of the Flipkart shares or appoint a majority of the Flipkart directors, each Minority Shareholder would also be entitled to transfer all of its Flipkart shares to the proposed buyer or buyers of Walmart's Flipkart shares.
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As per SEC filing, Walmart may take Flipkart public in four years.
Minority investors holding 60 percent of Flipkart's stocks "acting collectively, may necessitate Flipkart to effect an initial public offering" (IPO) 4 decades after the beginning of their Walmart Flipkart transaction, " the Bentonville, " Arkansas-based retailer said at a May 11 filing with an U.S. Securities and Exchange Commission. No termination fee would be payable by any party if the Share Issuance Agreement or the Share Purchase Agreement were terminated, it said.
Walmart said it may elect to ask Flipkart to issue shares worth Dollars 3 billion within a year of close of transaction but did not clearly say if the investment would be brought in by it or a new partner.
"Shareholders agreement would expire upon the consummation of the IPO, whether initiated by the board or the minority stockholders", it added. The right to buy additional stake is important as Softbank, one of Flipkart's largest shareholders with a 20% stake, has still not made a final decision to sell its holding because of tax reasons.
In certain situations, Walmart and a percentage of Minority Shareholders may exercise a "drag along" right to cause the remaining Minority Shareholders to sell all or a portion of their shares in a sale of Flipkart.