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SoftBank-backed quick commerce unicorn Blinkit (formerly Grofers) and food delivery aggregator Zomato have signed a term sheet for a merger in an all-stock deal valued at $700-800 million, sources in the know told BusinessLine.
The companies signed the term sheet a few weeks ago and will approach the competition commission of India for approval soon. The deal is expected to be closed in another 60 days.
Interestingly, Blinkit had raised around $120 million from Zomato at a unicorn valuation of $1 billion in June last year. This deal is at a lower valuation.
With this deal, Blinkit’s single largest investor SoftBank, which holds around 40 per cent stake in the company, will be offered about 4-5 per cent shareholding in Zomato, the sources said. Meanwhile, common investors in both the companies Tiger Global and Sequoia Capital will get incremental increase in shareholding in Zomato.
To avoid conflict of interest, Zomato’s founder and CEO, Deepinder Goyal had sold off his personal stake in Blinkit last month.
Taking on Swiggy
“The deal makes sense business-wise for Zomato as it wants to compete Swiggy in the quick commerce space which operates Swiggy Instamart. And Blinkit has been able to deliver,” a source said.
“Also, unlike 2021, fresh capital and funding pipeline is drying up in 2022, investors will likely be more careful about funding heavy cash-burn businesses like quick commerce. This merger will be a great bail-out of Blinkit; else, raising funds this year would have been comparatively difficult,” the source added.
E-mails sent to Blinkit and SoftBank for comments went unanswered.
As of January 2022, Blinkit operated more than 300 stores across 14 cities, it told BusinessLine. The company is also actively expanding into tier-2 markets.
Zomato, too, will be aggressively scaling the quick commerce vertical. In February 2022, the online food delivery major had said that it will be investing $400 million in the quick commerce business over the next two years. Zomato had said that this investment confidence came from how Blinkit had managed to scale and ace the 10-minute grocery delivery model, recording $450 million annual run rate gross merchandise value as of January 2022 annualised.
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