eBay acquires 36% stake in GMarket
Posted by: Catherine Holahan on August 13, 2008
EBay plans to acquire a minority stake Asian e-commerce giant GMarket (GMKT). The U.S. e-commerce company announced the planned purchase Aug. 13, two weeks after initially sending a letter to the Korean Fair Trade Commission stating its intention to buy the equity of the South Korean company’s largest share holder, Chairman Ki Hyung Lee. “While no definitive agreement has yet been signed or reached, in connection with the discussions, a voluntary preliminary filing has been made,” said eBay in a statement.
Chairman Lee holds roughly 36.4% of the company’s 50.05 million outstanding shares, either directly or through his company e-commerce company Interpark. At the current share price of $24.82, the deal is valued at $453 million. Should eBay and Chairman Lee agree on a price, the KFTC would still have to approve the transaction.
The move will give eBay a long desired foothold in the Asian market. EBay, like many U.S. companies, has repeatedly tried and failed to extend its success in the U.S. and Europe to Asia, where local competitors have strong ties to users. More than $927 million in goods were sold on the site in the second quarter of 2008. The company made $35.7 million in transaction fee revenue from those sales. Its net income, which includes money from advertising on its site and other items, was $15.4 million for the quarter.
The move will also help eBay counter growing competition for the Asian e-commerce market from Yahoo, which had purchased a 10% stake in GMarket in 2006 and has a 40% stake in the Alibaba Group, the parent company of China’s largest e-commerce company.
EBay’s decision is in keeping with its overall strategy to acquire or buy stakes in companies that can expand its core shopping business to new markets. The company has an 18.7% stake in MercadoLibre, a leading Latin American shopping site. More than 41% of eBay’s revenue has come from acquisitions, most notably from payments giant PayPal.
This is the second time eBay has purchased a large minority stake in an Asian company. It has a 49% stake in Tom Online, a Chinese mobile Internet company, similar to Skype.
EBay does not yet have plans to acquire all of GMarket. However, it has used minority stakes in the past as a precursor to acquisition, or attempted takeover. The company is currently battling U.S. classified site Craigslist in court over what Craigslist has characterized as a hostile attempt by eBay to turn its minority stake into an acquisition.
Earlier this year, eBay’s mergers chief Lorraine McDonough said the company was on the lookout to make acquisitions to bolster is shopping business. It began the year with about $5 billion on the balance sheet and anticipated generating an additional $2.3 to $2.4 billion in cash by the end of the year.