Zilingo co-founders made a last-ditch offer to buy the embattled fashion e-commerce platform as the board debates its future, according to people familiar with the matter.
Co-founder Dhruv Kapoor on Sunday proposed a management buyout to the Singapore-based company’s board, according to the people, who asked not to be named as the matter is private. He has secured commitments from a small group of new investors including a US private equity firm, the people said.
Under the preliminary proposal, the investor group will inject $8 million in new equity in a newly incorporated entity in tranches, while the remaining assets and the old corporate entity will be liquidated in due course, according to Kapoor’s email sent to investors and seen by Bloomberg News. All outstanding debt owed to creditor Zorro Assets will be frozen for three years, according to email.
The move comes as Zilingo’s board is scheduled to meet on Monday to discuss the future of the company, according to people with knowledge of the matter. Allegations of financial irregularities in March prompted an investigation into the company, valued at $970 million in 2019, and led to the dismissal of co-founder Ankiti Bose as chief executive officer in May.
Sequoia Capital, which owns 26.5 per cent in Zilingo declined to comment on the story. Kapoor's offer stated that Zilingo's subsidiaries, assets, debt obligations, contracts and key employees of verticals will be bought out by the new company.
According to the offer, there will be a 36-month moratorium on the repayment of the debt by the new company and repayments will happen in four quarterly installments after the moratorium. Lenders will remain senior in priority, the offer statement said. The new investor group is willing to negotiate grant of equity in the proposed new entity to existing shareholders of Zilingo on a mutually agreed basis, according to the offer.
The offer also proposed a new five-year business plan for Zilingo, which needs to be agreed upon among the investor group, the new proposed entity and existing shareholders of Zilingo. Confirmatory due diligence should be completed in seven calendar days if and once the management buyout offer is accepted, the investor group said in the offer.