Walmart to sell bonds to help finance the Flipkart acquisition

The company plans to continue its current share buyback program, as indicated by S&P analyst Diya Iyer that it will have a “potentially less conservative financial policy” going forward.

Walmart is reportedly selling bonds in the United States to help finance its Flipkart deal. The company sold bonds worth $16 billion to help finance its stake in the Indian e-commerce giant. The deal is still seeking permissions from Competition Commission of India (CCI) while figuring out taxation issues. The Global retailer is looking to arrange funds to pay for its recently acquired 77% stake in Flipkart.

Company’s filings revealed that it is offering fixed and floating rate bonds in around nine parts. The longest bond is a 30-year security and yields about 1.05% points above treasuries. Walmart had confirmed its acquisition in Flipkart last month of 77% and leave the remainder to Flipkart’s co-founder Binny Bansal along with other shareholders. The largest ever Walmart deal in India’s fastest growing e-commerce platform brings tough competition to Amazon. Filings further revealed the firms managing the bond sale include Citigroup, Barclays, Bank of America, HSBC Holdings, Wells Fargo and JP Morgan Chase and Co. Before confirming to its investment in Flipkart, Walmart had agreed to cede control of its British business namely Asda for $10 billion to a competitor. This happened after the chief of Walmart Doug McMillion wanted to focus on markets with high potential like China and India.

The mega deal has received heavy criticism for Walmart. Wall Street prompted several equity analysts to cut their price targets for Walmart’s stock or place it under review. S&P Global Ratings stated that there is a 33% chance that Walmart’s AA rating will downgrade in the next two years because of the company’s ‘aggressive global deal making’ with the company competing with Amazon. In the Indian market, many traders including AIOVA and CAIT among others have raised concerns against the deal. They believe the deal is ‘cancerous’ and asked the Government to examine it.

Before Walmart can celebrate the deal, it still has a long way to go clearing the formalities of the deal.

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