Shinsegae inches closer to eBay Korea purchase; deal remains elusive

Shinsegae Group has inched closer to a deal to acquire eBay Korea that would see the South Korean retail giant emerge as an e-ecommerce behemoth with 24 trillion won ($21.5 billion) in online transactions.

According to investment banking sources on June 14, Shinsegae has offered to pay about 4 trillion won for a 100% stake of the US retail giant's Korean business, while its only rival Lotte Group has submitted a binding proposal worth slightly more than 3 trillion won.

Earlier this month, Shinsegae and Lotte were chosen as the final bidders for eBay Korea, which the US retail giant says is worth at least 5 trillion won.

According to eBay Korea’s sale underwriters Goldman Sachs and Morgan Stanley, E-Mart Inc., a Shinsegae affiliate, formed a consortium with Naver Corp., Korea’s largest online platform company, to compete against Lotte.

The sellers are expected to conduct another round of progressive bidding until they sign the final sale and purchase agreement (SPA) with the successful bidder to raise the sale price.

NOT A DONE DEAL

Sources said Shinsegae now has the upper hand, but it’s still not a done deal, as Lotte could raise the ante at the last minute to acquire eBay Korea.

“Given Lotte’s fat war chest, it’s not over until it’s over. If Lotte makes up its mind (to acquire eBay Korea), it will offer to pay more,” said an official close to the deal.

Market watchers say the acquisition price is the biggest stumbling block to a successful conclusion of the deal.

The seller is reported to be asking for at least 5 trillion won, applying a 0.25 multiple on eBay Korea’s 2020 transaction amount of 20 trillion won.

Sources said there is the possibility of a deal breaking down given the wide price discrepancy.

The sale managers and eBay could announce the preferred buyer as early as Tuesday,  after the US retail company’s board meeting.

WINNER TO LEAPFROG COUPANG

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, the third-largest in the country, compared with Coupang Corp.’s 22 trillion won and Naver’s 27 trillion won.

Shinsegae’s e-commerce brand SSG.COM has annual transactions of 4 trillion won and if it acquires eBay Korea, its combined online transactions would reach 24 trillion won a year.

Shinsegae and Lotte have struggled to catch up to leading competitors like Coupang in the fast-growing online shopping sector, especially following the onset of the COVID-19 pandemic.

From early in the race, Shinsegae was considered one of the strongest candidates. Shinsegae has 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 moves to strengthen its e-commerce business.

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.

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, including the Fair Trade Commission (FTC).

Write to Jun-Ho Cha at chacha@hankyung.com
In-Soo Nam edited this article.