Snapdeal in talks to acquire ShopClues in all-stock deal
New Delhi: E-commerce platform Snapdeal is close to buying out rival ShopClues in an all-stock deal. The due diligence for the acquisition started a few weeks ago, and a final decision is expected soon. Also, Snapdeal is reportedly looking to raise fund at a valuation of about USD 2 billion, which could be supported by the acquisition.
The proposed deal may see ShopClues investors get one Snapdeal share for every nine they hold if the merger materialises in this planned structure, and may provide them a 10 per cent stake in the combined entity, says an Economic Times report.
“The ask from Shopclues is to get at least a 30 per cent stake in Snapdeal as part of the transaction,” one of the persons told the financial daily. Another person familiar with the matter told the daily that the management and founders, Radhika Aggarwal and Sanjay Sethi, are likely to get a small cash exit.
The transaction may be a 100 per cent acquisition, with all of ShopClues’ investors, including Singapore’s sovereign wealth fund GIC, Helion Venture Partners, Tiger Global, Nexus Venture Partners and Unilazer Ventures, rolling into Snapdeal.
If the deal goes through, it will be a massive consolidation move in the long-tail ecommerce market, which has mainly served tier 2 and tier 3 cities customers, away from the core audience of ecommerce behemoths Amazon and Flipkart. Items sold on long-tail marketplaces are low-priced, typically in Rs 500 to Rs 1,000 range.
Clues Network, which manages ShopClues, has so far raised USD 250 million and its business declined in the past year, pushing it to the number five slot on the gross merchandise value, or GMV, chart.
Shopclues’ web and mobile web traffic has dropped to 11 million in April from 16 million in November last year, the report mentioned, citing SimilarWeb data. Snapdeal’s rose to 82 million from 68 million in the same period.
However, ShopClues has trimmed losses from Rs 210 crore in 2017-18 to less than Rs 45 crore in 2018-19, while maintaining its top line.
Satish Meena, senior forecast analyst at research firm Forrester Research, told the daily: “Snapdeal and Shopclues are trying to make a business in the long-tail category by selling items below Rs 900-1,000 with no promise of next-day delivery. This allowed them to tap into first time online buyers in tiers II and beyond cities in the past. But things may become more competitive after Amazon and Flipkart start chasing these markers.”