Ebay to take over Korean auction website

Ebay on Thursday unveiled its plans to take over Gmarket, a South Korean auction site, for $1.2bn as part of a move by the US group to accelerate its push into Asia as its core home business suffers.

The purchase of Gmarket, which is listed on Nasdaq and has more than 18m registered users in South Korea, will make Ebay a dominant force in the country’s vibrant e-commerce market and give it a springboard for expansion into other parts of Asia, where the company has a relatively weak presence.

Ebay already operates Internet Auction in South Korea, which it acquired in 2001, but Gmarket has emerged as a strong local competitor with better growth momentum. Following the acquisition, Ebay would control 37 per cent of South Korea’s e-commerce market. It is the world’s sixth-largest, measured by total value of annual online transactions, according to Morgan Stanley.

“The combination of Gmarket and Internet Auction establishes an exceptionally strong leadership position for Ebay in one of the world’s largest, most dynamic and innovative e-commerce markets,” said John Donahoe, Ebay’s president and chief executive.

The US company on Thursday said it had signed an agreement with Korea’s Interpark, Gmarket’s biggest shareholder, to buy a 29 per cent stake in Gmarket for $350m. Yahoo has also agreed to tender its 10 per cent stake in Gmarket to Ebay.

Ebay said it planned to make a tender offer for the remaining shares in Gmarket at $24 a share to increase its stake to at least 67 per cent. If all outstanding shares are tendered, the deal would be worth about $1.2bn.

The deal, expected to be closed in the second quarter, represents a 20 per cent premium on Gmarket’s latest closing price.

Ebay won approval for the deal from South Korea’s Fair Trade Commission in September. Internet Auction and Gmarket reported $161.2m and $220.8m in 2008 revenue respectively.

“South Korea has been chosen as a base for this global company to make inroads into Asia,” Jay Lee, senior vice-president at Ebay, said. “We will seek to venture abroad based on Korea’s advanced experiences and smart talent pool.”

Gmarket has become one of the most popular online shopping malls in South Korea, with its focus on fashion, low prices and aggressive marketing. The country is the world’s most wired nation, with 95 per cent of households having access to broadband services.