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E-commerce M&As

Lotte vs Shinsegae: eBay Korea becomes battleground for retail showdown

The traditional retail giants are gearing up for an industry-disrupting duel

By Jun 07, 2021 (Gmt+09:00)

Shinsegae Group Vice Chairman Chung Yong-jin (left); Lotte Group Chairman Shin Dong-bin (right)
Shinsegae Group Vice Chairman Chung Yong-jin (left); Lotte Group Chairman Shin Dong-bin (right)

The tussle over the acquisition of eBay Korea is now down to two heavyweight contenders.

South Korea’s retail titans Lotte Group and Shinsegae Group were the only two parties that submitted final bids for the acquisition, according to investment banking sources on June 7. Shinsagae competed in the final bidding by forming a consortium with Naver Corp., the country’s largest online platform company.

The other two shortlisted candidates, SK Telecom Co. and MBK Partners, did not participate in the bidding held on Monday by eBay Inc. and its sale underwriters Goldman Sachs and Morgan Stanley.  

“While we decided not to submit the bid today, we will keep monitoring the deal closely,” said an MBK Partners official.  

Having entered the Korean market in 2000, eBay Korea operates the country’s two largest open market platforms -- Gmarket and Auction -- as well as a curated shopping platform, G9. An open market platform is an online marketplace that connects a wide range of third-party sellers with consumers.

The combined annual transactions of eBay Korea units last year were valued at 20 trillion won ($18 billion), the third-largest in the country, compared with Coupang’s 22 trillion won ($19.8 billion) and Naver’s 27 trillion won ($24.3 billion).

Shinsegae’s e-commerce brand SSG.COM’s annual transactions were valued at 4 trillion won ($3.6 billion), whereas Lotte Group’s Lotte ON had an annual transaction of 7 trillion won ($6.3 billion) last year.

From early in the race, Shinsegae Group was considered as one of the stronger candidates. Shinsegae has lately been aggressive in forming a so-called “anti-Coupang alliance” through a number of game-changing moves including a share swap deal with Naver in March.

Shinsegae’s buyout of SK Group’s baseball club and its acquisition of online fashion platform W Concept are also seen as strategic actions to strengthen its e-commerce business.

Chung at an SSG Landers inauguration ceremony. Lotte has a baseball club based in Busan.
Chung at an SSG Landers inauguration ceremony. Lotte has a baseball club based in Busan.

If the Shinsegae-Naver consortium succeeds in acquiring eBay Korea, it will create a mega-sized e-commerce platform with an aggregate annual transaction of 55 trillion won ($49.5 billion). But given Naver’s leading position in the e-commerce sector, some say that the consortium may face scrutiny from the country’s antitrust regulators, such as the Fair Trade Commission (FTC).

Lotte’s stake is also high in the game. The performance of the group’s own platform Lotte ON is regarded as satisfactory at best compared to Lotte’s dominant influence in the traditional retail segment from department stores to supermarkets. Lotte sees the eBay Korea acquisition as a groundbreaking opportunity to revive its e-commerce business.

Market watchers say the acquisition price is the key issue. The seller is reported to be asking for at least 5 trillion won ($4.5 billion). The calculation is based on applying a 0.25 multiple on the company’s last-year annual transaction amount of 20 trillion won ($18 billion).

But industry analysts project that the deal is likely to be made at the price of around 3 trillion won ($2.7 billion). It is reported that the seller has also offered the bidders the option of partial ownership with a controlling stake, instead of buying 100% of the shares. They added that there is also a possibility of withdrawal if the price discrepancy fails to narrow.  

“Both Lotte and Shinsegae know that the eBay Korea acquisition is a game-changer. Their corporate identities as the country’s top retail companies are at stake. But if the purchase price is too extreme, the buyer may face a winner’s curse,” said an investment banking official.

Write to Chae-yeon Kim and Jun-ho Cha at why29@hankyung.com

Daniel Cho edited this article.

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