Naver tipped to pull out of Shinsegae-led eBay Korea deal

In the latest twist to the pending deal worth nearly $4 billion, South Korea's online titan Naver Corp. has tentatively decided to withdraw from a Shinsegae-led consortium formed to acquire eBay Korea, according to investment banking sources on Thursday.

Shinsegae is the likely winner of the eBay Korea acquisition, after its rival Lotte dropped out from the race. Shinsegae is understood to have offered a higher price than Lotte by one trillion won ($900 million) to buy the country’s third largest e-commerce player.

"We have participated in the bidding process, but the deal has not been finalized," Naver said in a regulatory filing on June 17, referring to eBay Korea.

"Nothing has been decided about how we are participating in the deal, nor whether or not we will participate in the final stage of the bidding process," it added.

Naver's remarks were made in response to a regulatory request to confirm media reports that it would team up with Shinsegae to acquire eBay's South Korean operations.

Sources with knowledge of the matter likened Naver's remarks to an ultimatum sent to Shinsegae which is spearheading the consortium for the eBay Korea purchase.

"We don't know how the situation will change until they sign a final agreement," one of the sources told Market Insight. "But it is true that Naver is negative about participating in the eBay Korea acquisition. Market Insight is the capital news outlet of The Korea Economic Daily.

From early on, Shinsegae brought in Naver as a partner after Affinity Equity Partners was negative about the retail giant's bidding for eBay Korea. Affinity Equity is the second-largest shareholder in Shinsegae's e-commerce brand SSG.COM.

Both Naver and Shinsegae had agreed to have the online giant pay 20% of the acquisition price, with the latter financing 80%.

But Naver's working-level officials expressed doubt about eBay Korea's growth potential, prompting the online portal to make an abrupt change in mind. Further, the high price tag of close to 4 trillion won was behind Naver's last-minute change in stance towards eBay Korea.

Additionally, Naver was concerned about the antitrust body's tightening scrutiny amid monopoly concerns. Naver offers price comparisons of open market platforms such as Gmarket and Auction, the key units of the US online retailer.  

But Naver's pull out of the Shinsegae-led consortium would not mean a collapse in the acquisition deal. Shinhsegae has already built a war chest enough to finance the acquisition on its own. It has raised about 5 trillion won in cash by leveraging its assets to prepare for the eBay Korea purchase.

Still, there remain uncertainties for Shinsegae, the only negotiator for eBay Inc.'s Korean arm, to close the deal. To reduce the acquisition price, Shinsegae could take over only 80% of eBay Korea, while the Korean unit retains 20%, according to market sources.

For its part, Lotte is in discussion with SK Telecom Co., which runs the online mall of 11Street, as well as with the country's No.2 offline retailer Homeplus owned by MBK Partners, to cooperate in the online realm.

Write to Jun-ho Cha at chacha@hankyung.com
Yeonhee Kim edited this article.