Walmart is in late-stage discussions to buy a majority stake in India’s online shopping site Flipkart, in what would be the company’s most ambitious move yet to take on Amazon outside of the U.S., according to multiple people familiar with the talks.
But Walmart will likely have to first work out a deal with eBay, a Flipkart investor and partner, if it wants to do much business with its new Indian subsidiary over the next few years.
eBay last year invested around $500 million in Flipkart, taking a 5 percent stake in the business and handing over its eBay India operation in the process.
Alongside the investment, eBay also signed what was then a four-year exclusive commercial arrangement to partner with Flipkart, a move that eBay CEO Devin Wenig at the time said was the part of the deal he was “most enthusiastic about.”
The agreement was designed to give merchants who sell on Flipkart access to more than 150 million new customers from eBay around the globe. The deal was also meant to provide eBay sellers outside of India with access to a new group of consumers inside of that country.
The eBay obstacle
The potential obstacle for Walmart is that the eBay deal still has three years to go and is believed to cover all types of merchandise except grocery items.
So even if Walmart gets control of Flipkart, it may not be able to consummate actual merchandise deals with Flipkart — it seems likely it’ll have to settle this arrangement first. eBay also has the right to take back control of the eBay India brand name should Flipkart get acquired, according to one person familiar with the arrangement.
Walmart’s advanced talks with Flipkart were first reported by Reuters, but details of the potential hurdles involving eBay have not previously been reported.
Spokespeople for Walmart and eBay declined to comment.
Walmart has reportedly offered $10 billion to $12 billion for a 51 percent stake in Flipkart, according to the Reuters report. At that price, Walmart is making a gigantic bet on the India market, where Amazon has poured billions of dollars over the last five years to make sure it captures the next huge e-commerce market after faltering in China.
It’s possible that Walmart is only taking a long-term view with the acquisition and won’t feel the need to pay eBay to be able to work with Flipkart on commercial deals for the next three years.
But it seems just as likely that Walmart will have at least some concern over the near-term optics of this deal in the eyes of investors; Flipkart lost $1.4 billion on $3 billion in revenue last year, according to filings cited by Indian news publications. And that may lead Walmart to strike a deal with eBay to be able to talk about why the deal makes sense in the short term, in addition to the long term.
This article originally appeared on Recode.net.