Bengaluru/New Delhi: The proposed Snapdeal sale to Flipkart has been put on hold and may be called off as the founders and shareholders of the struggling online marketplace have not yet agreed on the terms of the deal, three people familiar with the matter said.

Snapdeal and Flipkart didn’t respond to emails seeking comment. A SoftBank Group Corp. spokeswoman said it was premature to comment on the Snapdeal sale and SoftBank’s investment in Flipkart. “There will be a decision by tonight," the spokeswoman said.

Mint learns that an announcement could come as early as Monday morning.

Over the weekend, Snapdeal (run by Jasper Infotech Pvt. Ltd) and Flipkart Ltd cancelled a key meeting that had been scheduled for Monday to continue negotiations over the deal, the people said.

Snapdeal is pushing ahead with a plan to survive as an independent entity that will involve the company reducing a majority of its 1,400-plus workforce and dramatically cutting the size of its business, the people said.

Separately, SoftBank, Snapdeal’s largest investor, was in talks to buy shares worth $1.5 billion in Flipkart, the people said. SoftBank had planned to invest $500-700 million in Flipkart and buy shares worth roughly $1 billion from its largest shareholder, Tiger Global Management, the people said. It’s not clear if this deal is still on, two of the three people said. Before the latest development, the SoftBank investment was to happen along with the Snapdeal sale. The third person said SoftBank will continue its talks to invest in Flipkart even if the Snapdeal sale doesn’t go through.

Last week, it seemed like the on-again-off-again Flipkart-Snapdeal merger would finally be completed. On 26 July, the board of online marketplace Snapdeal gave the go-ahead to the company to continue negotiations to sell itself to Flipkart, which had increased its buyout offer to $850 million two weeks ago.

However, there are three major problems holding up the deal. One, Snapdeal co-founders Kunal Bahl (CEO) and Rohit Bansal (chief operating officer) were against the sale to their sworn enemy Flipkart from the start and they would still prefer to keep Snapdeal independent, the three people cited above said.

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Bahl and Bansal had also expressed reservations about the “indemnity clause" in the proposed deal, the people cited above said. As per this clause, the founders of Snapdeal and its board will be held accountable for the representations they have made to Flipkart about the company’s financial statements, business, structure and other matters, the people said. The Snapdeal founders want this clause to be watered down, they said.

Their efforts to keep the firm independent were boosted by the sale of its payments unit FreeCharge to Axis Bank Ltd last week for Rs385 crore in cash, the people said.

Two, some of Snapdeal’s minority shareholders are against the proposed payouts to Nexus Venture, Kalaari Capital and the Snapdeal co-founders, the people said. After SoftBank, Nexus and Kalaari are the largest investors in Snapdeal, which has more than 25 institutional shareholders, and they were supposed to get higher payouts relative to other shareholders as part of the deal, the people said.

Three, SoftBank wants Flipkart to change the structure of the sale. According to the current structure, the deal would impose tax liabilities on SoftBank which it finds unacceptable, one of the people cited above said. SoftBank has asked for a new deal structure, this person said. Mint couldn’t ascertain what exactly these obligations are.

Credit Suisse and J. Sagar Associates are the investment banking and legal advisers to Snapdeal, respectively. Goldman Sachs and Khaitan and Co. are representing Flipkart.

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