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Walmart Delivers Big Blow against Amazon with Flipkart Takeover

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Retail giant Walmart delivered a major blow against Amazon in the fight for India’s rapidly-growing e-commerce market of some 1.3 billion customers with the approval of a US$ 16 billion bid for a majority stake in Flipkart, the subcontinent’s largest online operator by sales volume. In what is thought to be the single largest foreign direct investment in Indian history, Flipkart’s board has approved an agreement to sell 77% of the company to the world’s largest retailer at a valuation of roughly US$ 20 billion. Google parent company Alphabet Inc. – earlier reported to be picking up a 15% stake for US$ 3 billion – has said negotiations are ongoing as to whether it will join Walmart as a co-investor.

If completed, the acquisition will grant Walmart access to some 32% of India’s e-commerce sector gained by Flipkart since its founding in 2007 by former Amazonians Sachin and Binny Bansal, who share a mutual interest with the Arkansas-based mega-retailer in maintaining dominance on the subcontinent over their former employer and shared rival. In addition to a US$ 2 billion infusion of new equity, Walmart brings a treasure trove of experience in logistics and marketing that will allow Flipkart to shore up its overhead costs and expand its portfolio into grocery sales.

Amazon has committed approximately US$ 5.5 billion towards aggressively expanding its Indian operations since arriving on the scene in 2013, capturing some 31% of the market and positioning itself to overtake Flipkart as the undisputed local leader of online retail. With Flipkart’s pact with Walmart sealed, however, any opportunity to assume the lead in India is unlikely to materialize, forcing Amazon CEO Jeff Bezos and company to settle for the unfamiliar role of second place in a country that is projected to grow into one of Amazon’s largest sources of revenue outside the U.S. in the years to ahead.

The Seattle-based firm has struggled to duplicate its North American success overseas in the face of stiff competition from local outfits such as Flipkart and China’s Alibaba who have had far longer to build out their logistics networks and tailor their offerings to customers far removed from – and far less enamored with – the power of Amazon’s not-quite-global brand, which saw losses on its international operations more than double in 2017 to US$ 3 billion, compared to US$ 1.3 billion from the year previous.

Sovereign Wealth Fund-Backed

Under the agreement, SoftBank Group of Japan will make a quick and tidy turnaround of US$ 4 billion on the 20% stake in Flipkart it bought through its Vision Fund for US$ 2.5 billion just last August, when the company was valued at US$ 12 billion. The exit is a first for the US$ 93 billion technology fund, which received sizeable contributions from a number of sovereign backers, including Abu Dhabi’s Mubadala Investment Company and the Public Investment Fund of Saudi Arabia.

Singapore’s GIC Private Limited is also an investor in Flipkart. According to data from the Sovereign Wealth Fund Institute’s transaction database, sovereign wealth funds and public pensions have directly invested US$ 8.89 billion into India in 2017 and US$ 4.68 billion in 2016.

Other existing shareholders – including Microsoft, eBay, Tencent Holdings, and early investors Tiger Global Management and Accel Ventures – will retain small minority stakes. Walmart chief executive Doug McMillon is reportedly flying to Flipkart’s headquarters in Bengaluru this week to announce final closing of the deal.

RDIF and Makara Capital form Technology Company Investment Joint Venture

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The Russian Direct Investment Fund (RDIF) and Singapore-based Makara Capital, a specialist in transaction financing and asset management, signed a deal to form a US$ 200 million joint investment platform to finance breakthrough innovative projects in Russia and Asia. Ali Ijaz Ahmad, the CEO of Makara Capital, is a board director of the Intellectual Property Office of Singapore (IPOS). Ali Ijaz Ahmad served as an adviser to Morgan Stanley and The Carlyle Group. He also had stints at the World bank and Goldman Sachs. Makara Capital was founded in 2005 as a joint venture with Credit Suisse AG and made independent by its founding partners in 2008.

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SVB Financial Group to Acquire Leerink Holdings

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Linking Boston to the San Francisco Bay Area in the world of pharmaceuticals, SVB Financial Group (SVB) announced that it has entered into a merger agreement to acquire Leerink Holdings LLC, the Boston-based parent company of Leerink Partners LLC, an investment bank focused on the healthcare and life science industries. Jeffrey A. Leerink formed Leerink in 1995. Santa Clara, California-based SVB Financial Group is the parent company of Silicon Valley Bank. SVB is big into life sciences and provides services to many healthcare companies and startups.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Digital Currencies Gaining Steam Among Central Banks

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At the Singapore Fintech Festival, International Monetary Fund head Christine Lagarde noted that central banks should consider issuing digital currency, as non-cash payments increased over the years – especially in developed markets. Digital currencies, also known as cryptocurrencies, such as bitcoin have lost tremendous value in recent months. Lagarde is referring to having the central bank issue digital currencies. Lagarde argued that a digital currency would be the liability of the state and not a private company. Saudi Arabia, China, Canada, Sweden, and even Uruguay have tinkered with possibly having digital currencies or some form. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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