SKT and MBK Do Not Participate in Main Bidding
Announcement of Preferred Negotiation Partner Possible Next Week
[Asia Economy Reporter Jo In-kyung] The eBay Korea acquisition battle, considered the largest domestic merger and acquisition (M&A) deal in the first half of this year, has been narrowed down to a two-way competition between retail rivals Lotte Group and Shinsegae Group. Both companies are engaging in a survival competition to secure dominance in the future e-commerce market, going beyond mere expansion of scale.
In particular, Shinsegae's Emart is highly likely to have joined forces with Naver for a joint acquisition, and depending on the outcome, the landscape of the domestic e-commerce market is expected to change significantly.
Everlasting Retail Rivals... A Battle for Future Survival
According to the retail industry on the 7th, Lotte Shopping and Shinsegae Group's Emart submitted letters of intent for the final bid to acquire eBay Korea, which closed at noon that day. The acquisition prices submitted by each company have not been disclosed.
Accordingly, Lotte and Shinsegae, who have traditionally competed head-to-head in offline retail channels such as department stores and large supermarkets, are now engaged in a new battle to gain leadership in the e-commerce market centered on online platforms.
eBay Korea, which operates Gmarket, Auction, and G9, is estimated to have recorded approximately KRW 17 trillion in transaction volume, KRW 1.3 trillion in sales, and KRW 85 billion in operating profit last year. Based on the KRW 161 trillion domestic online shopping transaction volume compiled by Statistics Korea in 2020, eBay Korea's market share is about 12%. The company that acquires eBay Korea among Lotte Shopping and Emart will instantly increase its market share and seize an opportunity to change the domestic e-commerce landscape.
Valuation Swelling to KRW 5 Trillion... Concerns Over 'Winner's Curse'
Industry insiders say that Lotte Shopping and Emart have been the most active in conducting due diligence on eBay Korea. Emart's SSG.com has achieved remarkable results online but still holds a small market share. In particular, if the Emart-Naver alliance succeeds in the acquisition, it will be able to surpass Coupang in market share.
Shinsegae Group and Naver announced a comprehensive cooperation plan after exchanging KRW 250 billion worth of shares in March, marking their first collaboration in the M&A market. Although the exact shareholding ratio of their participation in eBay Korea is not yet known, it is presumed that Shinsegae will be the largest shareholder with Naver participating partially.
Lotte Shopping also views the acquisition of eBay Korea as a golden opportunity to compensate for the sluggish performance of Lotte On, launched last year.
However, the acquisition price of up to KRW 5 trillion and the need for additional investment after acquisition are variables. Considering the intensifying competition in the online market and the declining market share of eBay Korea, there are concerns that the acquirer might fall into a 'winner's curse' with deteriorating financial conditions post-acquisition.
Nonetheless, both companies expect strong synergy effects through the combination of online and offline channels by acquiring eBay Korea. Lotte and Shinsegae have densely established nationwide distribution networks, including large supermarkets and supermarkets, which eBay Korea lacks, enabling fast nationwide delivery services.
Final Non-Participants Burdened by High Sale Price and Additional Investment
SK Telecom and MBK Partners, who participated in the preliminary bidding, did not participate in the final bid. SK Telecom, which operates 11st, judged that eBay Korea's valuation, rumored to be up to KRW 5 trillion, was overvalued and that the synergy after acquisition would not be high, thus deciding not to participate. Instead, it is expected to focus more on expanding partnerships with Amazon rather than acquiring eBay Korea.
Industry insiders had predicted that MBK Partners would participate in the acquisition battle expecting online and offline synergy effects by acquiring eBay Korea following Homeplus. As a private equity fund, they believed they could increase the valuation when reselling the two companies later.
Ultimately, eBay headquarters reportedly set the sale price of eBay Korea at over KRW 5 trillion, leading to comments among potential bidders that "the price is too high." The acquisition battle, initially expected to be a competition among four bidders, was narrowed down to a showdown between two companies to decide the final winner.
The schedule for selecting the preferred negotiation partner following the final bid closing has not been announced. However, since eBay headquarters' board meeting is scheduled next week, it is highly likely that the preferred negotiation partner will be announced after the board meeting.
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