Shinsegae to acquire eBay Korea for $3.9 bil.

Naver Founder and Chief Investment Officer Lee Hae-jin, left, and Shinsegae Group Vice Chairman and CEO Chung Yong-jin / Korea Times file

By Kim Yoo-chul

U.S. e-commerce giant eBay has chosen retail conglomerate Shinsegae as the new owner of eBay Korea, which has been up for sale since last year.

“EBay headquarters in San Jose, California, has chosen Shinsegae Group as the new owner of eBay Korea. EBay's board approved the plan,” a senior executive at a local investment bank said, Wednesday.

“Unlike a conventional acquisition deal, eBay headquarters skipped the process of naming the preferred bidder for the sale procedure of eBay Korea and that means eBay headquarters notified Shinsegae Group of its board-approved decision. Shinsegae's E-Mart and Naver are set to sign an agreement for a joint acquisition,” the executive added.

Shinsegae apparently offered a price that was below eBay's expectations. The executive said, “Shinsegae Group is said to have proposed around 4.4 trillion won (some $3.9 billion), which is quite below what eBay headquarters' hoped for, around 5 trillion won.”

E-Mart formed a strategic alliance with Naver, because Shinsegae Department store is scheduled to invest more money in mobile delivery application, Yogiyo, and acquire the remaining 50 percent stake in Starbucks. As a result, Naver will offer financial backing for Shinsegae's acquisition of eBay Korea.

Lotte Shopping and E-Mart submitted separate letters of intent to acquire eBay Korea earlier. The country's top telecom company, SK Telecom, and private equity firm (PEF) MBK Partners dropped out of the race.

The eBay Korea sale is widely expected to lead to major changes in the country's e-commerce industry, propelling one of the top bricks-and-mortar retailers to become the leading online store here. EBay Korea accounts for around 11 percent of eBay's global sales.

Launched in 2000, eBay Korea grew rapidly and achieved around a $75 million operating profit last year. However, it has seen powerful rivals emerge in the domestic market during the last few years, while “activist investors” such as Elliott Management have pressured eBay to sell off assets that display unimpressive growth prospects.

Once the acquisition process is completed, Shinsegae will become the largest shareholder of eBay Korea, followed by Naver. EBay Korea, which also operates G-Market and Auction, saw total transaction volume reach 20 trillion won last year, coming in third after Naver (27 trillion won) and Coupang (22 trillion won) in terms of total transaction volume.

“Shinsegae's eBay Korea acquisition will help it become the country's most powerful e-commerce company by surpassing Coupang. The point is how fast Shinsegae and Naver address possible conflicts of interest, such as an equity swap ratio, system integration and the navigation of new business models,” said Oh Rin-ah, an analyst at E-Best Investment, adding that Naver has strengths over Shinsegae when it comes to the operation of the e-commerce business.

Trade ministry data showed the country's total e-commerce monetary transactions jumped 25 percent last year, while eBay Korea accounted for about 12.8 percent of that market. Coupang accounted for 13 percent and Naver 18 percent.

Shinsegae's acquisition of eBay Korea will complicate matters for Lotte, which had intended to use the acquisition of eBay Korea as a launching pad to rebuild its moribund online business. Lotte's own online platform, LotteON, has failed to make headway.

“We will explore other ways on how to differentiate the group's e-commerce platforms for greater sustainability,” an official at Lotte Shopping said.