Flipkart buys Jabong at 68% discount in a discount sale!

swatkats

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Flipkart Ltd has acquired Jabong through its unit Myntra in a cut-price deal that values the online fashion store at $70 million, moving to preserve its position as India’s No.1 e-commerce marketplace in the face of an onslaught by Amazon India.

Flipkart, which beat other Jabong suitors such as Snapdeal, will pay cash for the acquisition, according to a statement by Global Fashion Group (GFG), which owns Jabong.

GFG has been looking for a buyer for Jabong for more than a year now. GFG held discussions with several firms, including Snapdeal, Future Group, Aditya Birla Group and Amazon.

“Fashion and lifestyle is one of the biggest drivers of e-commerce growth in India. We have always believed in the fashion and lifestyle segment and Myntra’s strong performance has reinforced this faith,”
said Binny Bansal, co-founder of Flipkart.

“This acquisition is a continuation of the group’s journey to transform commerce in India. I am happy that we will now be able to offer to millions of customers a wide variety of styles, products and a broad assortment of global as well as Indian brands,”he added.


Source: http://www.livemint.com/Companies/iicvIYFijqp9VRAx0ON46I/Flipkarts-Myntra-acquires-Jabong.html
 
Snapdeal’s Kunal Bahl is relieved at losing Jabong to rival Myntra


For someone who had lost a big deal to a rival the previous day, Snapdeal founder and CEO Kunal Bahl was remarkably upbeat and relieved on Wednesday.

Bahl was relieved he did not acquire Jabong, which fell into Flipkart’s lap , because he did not find the target clean. And he was upbeat because Snapdeal will spend the cash saved -- $100 million – to build its own fashion business.

“We have a high bar when it comes to governance, regulations, and compliance. Unless a company can clear that bar, we have issues,” Bahl said in an interview to HT.
Did Jabong fail to clear that bar?

“You can assume so,” said Bahl.

There have been reports and allegations that Jabong, as it rose to the frontline of online fashion retailers by burning large amounts on advertising and discounts, may not have followed the best practices. A former executive is said to have made personal gains in the company’s dealings. If true, these issues may weigh down the new owners.

Bahl wrote a note on Tuesday to the Snapdeal team, some of whom may have felt deflated by Flipkart acquiring Jabong, a deal Snapdeal had been gunning for. The note spoke of the reality of the beast that is mergers and acquisitions (M&As).

“M&A is very exciting when you are doing it. The real work begins after that, and the surprises come after that. I am happy for the people (the sellers) who got all this cash for a company that has all these issues,” Bahl said.
The learning for Bahl from this is that one must not buy things where one sees issues around governance and compliance. “We acquired FreeCharge earlier , a company that was squeaky clean. We have a very high bar, maybe the others don’t. To me, this is black and white, there is nothing in the middle,” Bahl said.

Bahl now wants to spend the $100 million saved by not buying Jabong on building Snapdeal’s fashion business. It’s a business that has immense room for growth. Even after all the companies have spent a combined $1 billion, a mere 1.5% to 3% of all fashion retail is online. That, in part, is because more than 90% of fashion sold in India is non-branded. Still, that’s a terrible return on capital.


http://www.hindustantimes.com/busin...ival-myntra/story-1PPZ72QaYrW1c09rqmLajP.html
 
Decent price imo, jabong does have a lot of issues. Many in my prev. company are from jabong and the company did have many big internal scams. This purchase wont be profitable for any company but just for consolidation.
 
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