Shinsegae, Naver win bidding battle for EBay South Korea
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South Korean retail giants Lotte Shopping and Shinsegae Group have submitted separate letters of intent for online marketplace eBay Korea, the retailers’ spokesmen confirmed on Monday.
It is a deal that will almost certainly shake up the country’s e-commerce retail segment, potentially propelling one of the country’s largest retailers into becoming the leading omnichannel operator in South Korea.
SK Telecom, South Korea’s biggest mobile carrier, and private equity firm MBK Partners, the largest shareholder of discount store chain Homeplus, reportedly dropped out of the race to acquire eBay Korea, which has been up for sale since last year.
This week’s formal bidding marks the second attempt to divest its interests by eBay Korea – which represents about 11% of global sales within the U.S.-based eBay corporation – and it wants at least $4.43 billion, a price that is looking increasingly attainable.
South Korea’s total e-commerce transactions jumped 25% last year according to Trade Ministry estimates and eBay Korea represents about 12.8% of South Korea’s e-commerce market, just trailing Coupang at 13% and market leader Naver with 18%. Its revenue is estimated at $1.17 billion, with an operating income of $76 million.
Coupang listed on the New York Stock Exchange in March, becoming the largest Asian company since Alibaba to go public in New York and raising $4.6 billion. Founded by billionaire Bom Kim, a Harvard business school dropout, Coupang is now the country’s most valuable start-up with a market capitalization of more than $60 billion, backed by Softbank’s Vision Fund.
By contrast, Lotte and Shinsegae’s market shares in the country’s e-commerce sector are estimated at just 5% and 3% respectively and the takeover of eBay Korea by either could reshape the country’s online retail segment and fast-track the winning bidder into a market-leading position. Both have struggled to catch up with the major online competitors, especially after the impact of the Covid-19 pandemic.
“Coupang listed on the New York Stock Exchange in March, becoming the largest Asian company since Alibaba to go public in New York and raising $4.6 billion.”
However, the picture is complicated. Naver could be one of the biggest beneficiaries if Shinsegae is successful as it is believed to be offering support in financing any acquisition. The retailer and portal established a strategic alliance in March and Shinsegae could switch to Naver Pay as the payment platform for three e-commerce websites operated by eBay Korea: Gmarket, Auction and G9. At present, eBay Korea uses its own online payment system called Smile Pay.
Top South Korean cellphone carrier SK Telecom and retail group E-Mart were still among the remaining suitors as the preliminary round of bids sought by the U.S. parent closed 16 March.
Indeed, SK Telecom had been the leading candidate. The group also operates the online platform 11Street through a subsidiary, making SK Telecom the fourth-biggest e-commerce provider. But 11Street has struggled to grow, leading SK Telecom to partner with Amazon AMZN 0.0% in November in a collaboration initially limited to 11Street hosting Amazon products, but likely to expand in scope.
Meanwhile, Lotte will no doubt view the purchase of eBay Korea as a springboard for rebuilding the group’s online business. In April 2020, the group merged the e-commerce sites of its department stores, supermarkets, electronics shops and other physical retail affiliates under one shopping platform called LotteON but it has failed to make much headway.
While all the potential suitors have refused to give much away, Kang Hee-tae, CEO of Lotte Shopping, admitted during a spring shareholder meeting: “We’re certainly interested.”
Launching in 2000, eBay Korea quickly grew and last year earned around $75 million in operating profit. But eBay Korea has been squeezed by rivals in recent years, while activist investors like Elliott Management have urged eBay to shed assets with poor growth prospects.
The U.S. parent’s hope of securing a lucrative deal initially looked ambitious but then Coupang went public successfully, boosting its hopes.
Whoever wins the battle for eBay Korea, the fact that the rivals are both major retail players should heat up the market and could lead to an array of collaborations and partnerships to fight scale with scale. South Korea is on the brink of the biggest online shake-up since eBay announced its arrival over two decades ago.
Questions & Answers
Q.Which companies were initially interested in acquiring eBay Korea but later withdrew from the bidding process?
Which companies were initially interested in acquiring eBay Korea but later withdrew from the bidding process?
SK Telecom, the country's biggest mobile carrier, and private equity firm MBK Partners, which is the largest shareholder of Homeplus, reportedly dropped out of the race to acquire eBay Korea.
Q.Why did the US parent company of eBay Korea decide to sell its interests?
Why did the US parent company of eBay Korea decide to sell its interests?
eBay Korea's US parent has been under pressure from activist investors, such as Elliott Management, to divest assets that show poor growth prospects. This led to the sale process.
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