As part of the agreement, eBay Inc will pay 0 million in cash and will transfer ownership of eBay.in to Flipkart, in exchange for an unspecified equity stake in the company.

Amid the continuous talk of whether it will acquire Snapdeal, Indias largest e-commerce player Flipkart pulled a coup by announcing on Monday that it will buy Indian business of the eBay Inc, as part of an excercise to raise $1.4 billion its single-largest to date from a consortium of Tencent, Microsoft and EBay.

As part of the agreement, eBay Inc will pay $500 million in cash and will transfer ownership of eBay.in to Flipkart, in exchange for an unspecified equity stake in the company, it said in a statement.

The investment by eBay is accompanied by a strategic commercial agreement with Flipkart. In exchange for an equity stake in Flipkart, eBay is making a cash investment in and selling its eBay.in business to Flipkart. eBay.in will continue to operate as an independent entity as a part of Flipkart, it said in the statement.

The fund-raising excercise also involves Chinas internet company Tencent and the global giant Microsoft, who will provide Flipkart remainder of the $.14 billion funds. The deal values Flipkart at $11.6 billion, it said.

Amazon on its tail

Flipkarts existing investors include Tiger Global Management, Naspers Group, Accel Partners and DST Global. China-based Tencent owns social messaging app WeChat and has investments across various online companies like Practo, Ibibo etc.

The move is being seen as Flipkarts attempt to ready a warchest to acquire the rival Snapdeal to become large enough to fend off any possible competition from Amazon.

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The acquisition of eBay India will surely help Flipkart gain scale and help it compete better with the fast-growing rivals, especially the global giant Amazon, which is fast catching up to beat it in its home market. Earlier last month, Chinas giant Alibaba invested $177 million investment in Paytm Mall, along with $23 million by the private equity player SAIF Partners, in a bid to gain entry into the Indian e-commerce industry.

eBay in the bag

Flipkart expects the transaction to close later this year, upon which, it will acquire eBays buyers in India. Further, eBay and Flipkart have also entered into an exclusive agreement in which they will jointly pursue cross-border trade opportunities.

The combination of eBays position as a leading global e-commerce company and Flipkarts market stature will allow us to accelerate and maximise the opportunity for both companies in India, Devin Wenig, President and CEO of eBay Inc, said in the statement.

eBay is committed to winning in India in partnership with Flipkart. Our exclusive global trade partnership will allow eBay and Flipkart to reach even more consumers around the world, he added. eBays global inventory will be accessible to more Indian consumers, while its active buyers globally will have access to Indian inventory provided by Flipkart.

This partnership bodes well for Indian and global customers, sellers and the wider e-commerce ecosystem. eBay.in has built a strong presence in India over the years and we hope to take it to greater heights as part of the Flipkart group, Binny Bansal, Group CEO, Flipkart said.

Excerpt from:

With eBay India in the bag and $1.4 bln in pocket, is Flipkart out to 'Snap'deal? - Financial Express