E-Mart, on Thursday, announced its intention of buying eBay‘s South Korean business for $3 billion (3.44 billion Won). E-Mart is owned by South Korean retailer Shinsegae Group and is the oldest and largest discount store chain in Korea with total sales volume exceeding US$9.4 billion in 2009.
E-Mart announced that it plans to acquire an 80% stake in eBay’s South Korean business for 3.4 trillion Won ($3 billion). eBay revealed that it will retain a 20% interest with an implied value of approximately $3.8 billion in the Korean-based business.
With the deal, E-Mart which is already the largest retailer in South Korea, will get an additional boost in the Korean e-commerce sector, where it has lagged behind competitors, such as Coupang. eBay Korea, on the other hand, gains a powerful backer after years of performing under par. EBay Korea was the leading e-commerce player in South Korea until 2015. By 2016, competition from the likes of Coupang intensified, leading to decline in eBay’s growth.
e-Bay Korea operates the e-commerce platforms Gmarket, Auction and G9, and is the country’s third-largest e-commerce firm with a market share of about12.8% in 2020.
Naver Corp initially joined forces with E-Mart in the bidding process for eBay’s South Korean business, but later pulled out of the acquisition.
Although the growth rate of South Korea’s online shopping market reached 41% between 2018 and 2020, the estimated growth rate of eBay Korea’s transactions was about 4%. Despite the underperformance, the business was still attractive to traditional retail giant Shinsegae’s E-Mart. For years now, E-Mart have struggled to build a leading presence in online shopping, especially after the onset of COVID-19, and buying eBay’s South Korean business will be instrumental.
Park Eun-Kyung, Samsung Securities analyst stated that the deal price was lower than what eBay Inc originally wanted. According to him, whether the price is competitive or not is expected to be judged in the short-term by improvement in eBay Korea’s performance, as eBay Korea’s recent efforts at direct-sourcing and rapid shipping can be helped by E-Mart’s buying power and cost control.
The transaction is expected to close by the end of the year or early next year, subject to regulatory approvals.
