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Two Years and Two Continents — Behind Walmart’s Flipkart Deal: DealBook Briefing

Credit...Abhishek N.Chinnappa/Reuters

Good Wednesday. Here’s what we’re watching:

• How well did Flipkart’s investors do?

• What did AT&T and Novartis want from Michael Cohen?

• Walmart finally announced a deal to buy control of Flipkart for about $16 billion.

• What the U.S.’s withdrawal from the Iran nuclear deal means for the business world.

• The bottom line on Vodafone’s big deal with Liberty Global.

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The story of Walmart’s $16 billion deal for Flipkart began nearly two years ago and spanned secret negotiations in both Bentonville, Ark., and Bangalore, India. Here’s an account of how it came together based on interviews by people involved in the transaction, who were not authorized to speak publicly about the deal.

Driving the deal was the retail giant’s push to bolster its presences in e-commerce and emerging markets like India. In recent years, Walmart had bought Jet.com and Bonobos. The giant American retailer also had moved to combine its Asda supermarket chain in Britain with a local rival to allow Walmart to focus its attention elsewhere.

Walmart had initially approached Flipkart in 2016. But it quickly backed away to focus on its $3.3 billion purchase of Jet.com, one of these people said.

By last November, Walmart was ready to discuss a deal. Initially, Walmart was focused on acquiring a minority stake in Flipkart, these people said. But over time, both sides came to realize that Flipkart could better realize its ambitions if Walmart owned a majority stake. From a business perspective, Flipkart would provide a base for e-commerce dominance in India, while Walmart could give a crucial boost in the grocery delivery business.

Walmart could also provide a permanent base of capital, which would allow Flipkart to avoid raising money every few years. For its part, Walmart would feel more comfortable if it had majority control, even as it was prepared to give Flipkart’s management some degree of independence.

In December, Amazon entered the fray, these people said. The e-commerce titan sought to buy Flipkart outright. But Flipkart was wary. It worried regulators would block a deal that would have combined India’s two biggest e-commerce services.

Discussions with Walmart pressed forward. Over the next few months, the boards of Walmart and Flipkart refined what became Wednesday’s deal: The size of the stake Walmart would buy and at what price. They also settled on which of Flipkart’s investors would sell. Some, including the investment firm Tiger Global Management and the Chinese internet giant Tencent, wanted to stay on board, betting that Flipkart would continue to grow. Others, including the nearly $100 billion SoftBank Vision Fund, were happy to cash out.

— Michael J. de la Merced

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Credit...Aijaz Rahi/Associated Press

Walmart’s agreement to buy a 77 percent stake in Flipkart for $16 billion — or a $20.8 billion valuation — is the American retail giant’s biggest takeover in years. And it’s set to give some of the Indian e-commerce company’s investors a healthy return.

Here’s how well some of them did:

Accel, which was one of Flipkart’s original investors, will be one of the biggest winners, according to a person with knowledge of its investment who was not authorized to talk publicly about them. The firm made a sevenfold return on its investments in Flipkart. That includes a return of 71 times at Accel’s India fund.

Tiger Global Management, which first invested in Flipkart’s Series A and poured about $1 billion into the company, according to a person with knowledge of its investment but was not authorized to talk publicly about it. Overall return: 4 times

• Naspers, the South African media investor that first invested in Flipkart in 2012 and has poured $616 million, sold out at $2.2 billion, according to Bloomberg. Overall return: 3.6 times

SoftBank, which invested $2.5 billion in Flipkart in August through its Vision Fund, is selling out at a $4 billion valuation, according to its founder, Masa Son. Overall return: 60 percent

Some investors who are keeping stakes in Flipkart — including Tiger Global, which will maintain a roughly 5 percent stake, Microsoft and the Chinese internet giant Tencent — could continue to reap returns should Flipkart eventually go public.

— Michael J. de la Merced

What exactly were AT&T and Novartis after when they made payments to a firm set up Michael Cohen, President Trump’s personal lawyer?

A new report from Bloomberg sheds more light on what AT&T wanted. AT&T told its employees in an email sent Wednesday that the company hired Mr. Cohen’s firm, Essential Consultants, to get insights on how the administration might conduct antitrust enforcement, among other things, according to Bloomberg.

AT&T is hoping to merge with Time Warner, a deal Mr. Trump has sharply criticized. His administration is now suing to stop the merger. AT&T paid Essential Consultations $200,000 in four payments, according to documents reviewed by the New York Times. AT&T, in a statement Tuesday, said: “Essential Consulting was one of several firms we engaged in early 2017 to provide insights into understanding the new administration. They did no legal or lobbying work for us, and the contract ended in December 2017.”

And AT&T may have paid Mr. Cohen a lot more than $200,000. CNBC, citing an unnamed source, on Wednesday reported that AT&T’s contract with Mr. Cohen allowed for payments up to $600,000.

Plenty of questions remain: How did AT&T and Novartis get introduced to Mr. Cohen? Why would the companies want insights from someone who was not known for his policy expertise? And did Mr. Cohen say that he had a special connection with Mr. Trump that could yield information?

- Peter Eavis

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Credit...Kamil Krzaczynski/Reuters

Walmart reached a $16 billion deal to buy a majority stake in Flipkart, India’s leading e-commerce platform.

Details

• Walmart will buy an initial stake of 77 percent in Flipkart and invest $2 billion in fresh capital into the Indian firm.

• The two companies said they are in continuing talks with other investors to purchase a stake, which might reduce Walmart’s eventual shareholding in Flipkart.

• Walmart said the purchase would reduce its net income by at least $750 million this year and by more than double that amount next year.

It’s a risky bet for Walmart

• Walmart has repeatedly stumbled in its e-commerce efforts in the United States.

• Although India’s population is rapidly coming online, the number of people with enough income to shop online is still tiny.

• Walmart is paying a hefty premium to buy its way into the pole position in India’s e-commerce market, but it has not yet outlined any strategy that would keep it ahead of Amazon there.

• While Flipkart is currently the market leader, Amazon’s relatively new India site is quickly closing the gap.

The big winners

• Sachin Bansal. Flipkart's co-founder, is selling his entire 5.5 percent stake in the company, becoming an instant billionaire.

• SoftBank Vision Fund, the investment vehicle run by Japanese billionaire Masayoshi Son, invested $2.5 billion in Flipkart in August. That the stake will now be sold for about $4 billion.

The advisers

• Walmart was advised by JPMorgan and Barclays on the banking side and Hogan Lovells, Shardul Amarchand Mangaldas & Co. and Gibson, Dunn & Crutcher on the legal side.

• Flipkart was advised by Goldman Sachs and law firms Gunderson Dettmer LLP, Khaitan & Co., Allen & Gledhill LLP and Dentons Rodyk & Davidson

Critic’s Corner

Una Galani of Breakingviews writes:

“After buying Jet.com for $3 billion a couple years ago, Walmart’s efforts to compete online in the United States have hit some bumps. Earlier misadventures in China prompted it to join forces with local rival JD.com in return for a small stake. India will test the U.S. company’s ability to keep pace halfway around the world with Amazon, whose investors are as patient as boss Jeff Bezos. This will be a make-or-break overseas deal for Walmart.”

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A Sturm Ruger display at a gun show. The firearms manufacturer will face proposals from gun-control activists at its annual shareholders meeting on Wednesday.Credit...Daniel Acker/Bloomberg

Sturm Ruger had urged shareholders for weeks to reject a proposal from a group of Roman Catholic nuns demanding more transparency from the company on whether it planned to develop safer products and monitor the ones already in circulation.

On Wednesday, a majority of investors sided with the nuns.

The vote was a rebuke to the company’s leaders and a victory for gun control activists.

Ruger must now produce a report by February on how it tracks violence associated with its firearms, what kind of research it is conducting related to so-called smart gun technology and its assessment of the risks that gun-related crimes pose to the company’s reputation and finances.

— Tiffany Hsu

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Credit...Lluis Gene/Agence France-Presse — Getty Images

ZTE, one of China’s most internationally successful technology suppliers, is facing a death sentence, reports Raymond Zhong of the NYT.

The United States Department of Commerce has blocked it from accessing American-made components until 2025, saying the company failed to punish employees who violated trade controls against Iran and North Korea.

ZTE said on Wednesday it had ceased “major operating activities.” Trading in ZTE’s shares has been suspended for weeks, and its staff have been instructed, in new company guidelines reviewed by The New York Times, to reassure anxious clients — while being sure to avoid discussing with them the American technology from which the company is cut off for the next seven years.

The stock is up 22 percent Wednesday after the struggling department store chain said it is collaborating with Amazon to provide tire installation.

Sears said it will provide customers who purchase any brand of tire on Amazon, including the Sears DieHard brand and full-service tire installation and balancing.

The service initially will available at 47 Sears Auto Centers in eight metropolitan areas: Atlanta, Chicago, Dallas, Los Angeles, Miami, New York, San Francisco and Washington, D.C.

This the second partnership that Sears has struck with Amazon in the past year. Last July, Sears said it would sell its Kenmore appliances of Amazon. The announcement pushed Sears’s shares up 24 percent. The stock is down more than 70 percent over the past 12 months.

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Michael CohenCredit...Brendan Mcdermid/Reuters

Washington was abuzz yesterday with the news that Michael Cohen’s Essential Consultants received $500,000 from an investment fund tied to the Russian oligarch Viktor Vekselberg. But AT&T and Novartis were also shown to have paid money to the firm — the one that Mr. Cohen used to pay Stormy Daniels.

AT&T said Essential was “one of several firms we engaged in early 2017 to provide insights into understanding the new administration,” and that its contract ended in December. Novartis said that its contract ran for a year, through February.

There’s no link between AT&T or Novartis and the investigations into Mr. Cohen. But AT&T does have business before the Trump administration, including its $85.4 billion bid for Time Warner. What an unnamed source told the WSJ:

“Right around [when the] inauguration is happening, we need somebody who knows the administration,” the person said. “How does he think? What are their priorities?”

The Atlantic notes that AT&T’s $200,000 payouts to Essential Consultants put it in the middle of the telecom giant’s overall lobbying expenses for last year.

The price of benchmark American crude oil rose to more than $71 early Wednesday.

The move higher comes a day after President Trump announced he was pulling the United States out of the Iran nuclear deal, as investors weighed the potential loss of Iranian crude oil to global supplies.

Oil prices are hovering near highs not seen since 2014 would seem to run counter to the President’s stated, or tweeted, preference for lower oil prices. But as American oil production has surged, the traditional view that higher oil prices act as a clear drag on American growth has become less of an item of faith.

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Credit...Chip Somodevilla/Getty Images

With President Trump making good on his threat to withdraw from the Iran nuclear deal, the business world has been grappling with what to do next. European companies like Total were considering whether to abandon investments — their governments promised unspecified protections — while Boeing and G.E. were also caught in the crossfire.

Meanwhile, oil continued to rise as the U.S. warned buyers to curb purchases from Iran within six months. (Saudi Arabia, Iran’s regional rival, said it would help stabilize markets.)

Peter Eavis’s take: While Mr. Trump’s foreign policies haven’t yet caused serious losses in the stock market, investors’ stoicism could face greater tests soon. Earnings growth for corporate America this year probably peaked in the first quarter. And since neither the E.U. nor China looks close to caving to Mr. Trump’s threats, global trade tensions look set to escalate.

The big question: How hard will the U.S. crack down on allies who don’t go along with sanctions — is this another trade fight?

Elsewhere in Iran news: Peter Thiel’s Palantir was helping monitor Iran. Some cybersecurity experts fear Iran will now hack more.

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Vodafone’s chief executive, Vittorio Colao.Credit...Sergio Perez/Reuters

In agreeing to buy Liberty Global’s cable networks in Germany and Eastern Europe for $22 billion, the British telecom giant is making the biggest move yet to consolidate the Continent’s internet industry. Vodafone won’t just be in wireless: It will offer high-speed internet and cable to 54 million customers.

Why this matters, according to analysts at JPMorgan Chase (via the FT):

We believe this event is a bellwether for the sector, and could potentially contribute toward a flurry of consolidation across Europe.

Not so fast: Expect Deutsche Telekom, now in Vodafone’s cross hairs, to fight the transaction.

Other telecom-adjacent news: Disney’s best quarterly results in two years were overshadowed by Comcast’s amassing a war chest to potentially challenge its Fox bid. James Murdoch won’t join Disney in any case. ESPN’s $750 million, five-year U.F.C. streaming deal shows that sports rights remain highly valuable. Sinclair Broadcasting may woo Sean Hannity and Jeanine Pirro. SoftBank’s latest earnings surpassed estimates because Sprint finally turned a quarterly profit.

• Richard Cordray, the former head of the C.F.P.B., won the Democratic nomination for Ohio governor, while Don Blankenship, the former Massey Energy C.E.O., came in third in the Republican Senate primary in West Virginia. (NYT)

• The House voted to scrap an Obama-era rule meant to prevent discrimination by auto lenders. (NYT)

• Insurers in some markets plan huge price increases for Affordable Care Act plans, partly because of the repeal of the individual mandate. (Axios)

• The tax incentives that Racine, Wis., or Newark throw at Foxconn or Amazon are signs of desperation, Eduardo Porter writes. (NYT)

• Shareholder gun-control activists plan to speak at Sturm Ruger’s annual meeting today, but don’t expect much change. (NYT)

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Eric SchneidermanCredit...Frank Franklin Ii/Associated Press

New York lawmakers have been considering whether to replace the state’s attorney general, a leading critic of both President Trump and Harvey Weinstein, with a woman. Potential candidates include Letitia James, New York City’s public advocate, and Kathleen Rice, who challenged Mr. Schneiderman for the job. (Ben Lawsky, once New York’s top financial regulator, has also been mentioned.)

Whoever replaces Mr. Schneiderman must decide whether to continue his moves against Mr. Trump.

And Gov. Andrew Cuomo has appointed a special prosecutor — not the Manhattan district attorney, Cy Vance Jr. — to investigate Mr. Schneiderman.

Elsewhere in workplace misconduct: Five more Nike executives have left amid a furor over harassment and discrimination. A judge approved the sale of Weinstein Company assets to Lantern Capital. And Martin Sorrell, who left WPP after unspecified allegations, plans a new venture.

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Credit...Yuriko Nakao/Reuters

• Toshiba is reportedly worried that Chinese regulators won’t approve its $18 billion deal to sell its memory business to a group led by Bain Capital. (WSJ)

• Glassdoor, the recruiting site, agreed to sell itself to Japan’s Recruit for $1.2 billion. (Bloomberg)

• Keystone Foods, the main U.S. supplier of Chicken McNuggets, has reportedly drawn interest from Cargill, Tyson Foods and Fosun International. (Bloomberg)

• The billionaire Albert Frère sold his 6.6 percent stake in Burberry, sending shares in the fashion house down nearly 7 percent. (Bloomberg)

• Prince Alwaleed bin Talal and Ashkenazy Acquisition agreed to buy full control of the Plaza Hotel in New York for a reported $600 million. (WSJ)

• TPG Capital is reportedly in talks to invest in Anastasia Beverly Hills, a makeup company, at a $3 billion valuation. (CNBC)

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Chris CoxCredit...Peter Earl McCollough for The New York Times

The company’s biggest mainstream products outside its main app — Instagram, Messenger and WhatsApp — will now fall under Facebook’s chief product officer, Chris Cox. A group of emerging technologies, including a new blockchain-focused team, will be overseen by Mike Schroepfer, the chief tech officer. And ads, personnel, security and growth will be run by Javier Olivan, who has led growth efforts.

Though the move had been under consideration for a while, the Cambridge Analytica scandal sped up those efforts, according to the NYT. And it may streamline reporting lines and help keep Facebook nimble. But while it gives Mr. Cox in particular more prominence, it doesn’t fundamentally change things.

Elsewhere in Facebook news: The company will block political ads from groups outside Ireland ahead of that country’s referendum on abortion. And Jeffrey Zients, an Obama administration official, will replace the WhatsApp co-founder Jan Koum as a director.

Elsewhere in tech: Here’s a prototype Uber flying taxi. The surge in A.I. and cryptocurrencies has created a shortage of graphics chips. Japan’s industrial future might be stuff that makes stuff. The union-affiliated CtW Investment Group plans to campaign against several Tesla directors. What else tech giants can do to improve racial diversity.

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Sally Yates Credit...Nicholas Hunt/Getty Images

Sally Yates, the former acting attorney general, has returned to King & Spalding as a partner specializing in investigations. (King & Spalding)

• Jefferies has hired Peter Scheman from Goldman Sachs as a co-head of Americas industrial banking. (Reuters)

• MoviePass, which goes through about $21.7 million a month, has $15.5 million left in cash. (Bloomberg)

• Deutsche Bank is reportedly considering cutting about a fifth of its U.S. staff. (Bloomberg)

• Picasso’s “Fillette à la Corbeille Fleurie,” once owned by David and Peggy Rockefeller, sold for $115 million at auction. And a New York judge rejected a lawsuit against the sale of Jean-Michel Basquiat’s “Flesh and Spirit.”

• The House of Lords amended Brexit legislation to demand that Britain stay in the European Economic Area. (BBC)

• Argentina has begun negotiating for credit from the I.M.F., still widely blamed there for a 2001 debt crisis. (NYT)

• Denver Post journalists came to Manhattan to protest the paper’s owner, the hedge fund Alden Global Capital. (NYT)

• Nordstrom Rack’s president flew to St. Louis to apologize to three black teens it had falsely accused of attempted theft. (NYT)

• Audi, Volkswagen’s luxury brand, found emissions-manipulating software in about 60,000 of its best-selling diesel vehicles. (WSJ)

We’d love your feedback. Please email thoughts and suggestions to bizday@nytimes.com.

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