Listen to this article
Yahoo, the world’s biggest internet media company, has agreed to take a 10 per cent stake in Gmarket, a leading South Korean online retailer, to strengthen its presence in the country’s fast-growing online shopping market.
The deal, announced on Wednesday, came as Gmarket said it was applying for an initial public offering on Nasdaq.
The internet shopping market in South Korea – the world’s most wired country with about 70 per cent of households connected to broadband services – currently generates around $11bn in annual revenue, a figure that is expected to rise to $14bn next year.
Yahoo will buy the stake from Oak Investment Partners, a US venture capital firm, to become the third-largest shareholder in Gmarket.
Gmarket declined to give the value of the deal, which will reduce Oak’s stake in the Korean company to 18.96 per cent. Interpark, a leading Korean portal, is the largest shareholder with 33.39 per cent, while Interpark chairman Lee Ki-hyung holds 11.2 per cent separately.
Yahoo hopes to take advantage of Gmarket’s strength in e-commerce, as it struggles to compete with domestic market leaders such as Daum Communications and Interpark which benefit from Koreans’ preferences to make online transactions on home-grown sites.
“We look forward to working with Gmarket to leverage their e-commerce expertise to further expand Yahoo’s leading position in commerce in Asia,” said Dan Rosensweig, Yahoo’s chief operating officer.
For Gmarket, the deal is expected to provide it with opportunities to expand overseas. The two sides said they plan to pursue “various strategic initiatives” globally and in Korea.
“We believe that this strategic investment by Yahoo is in line with and enhances our strategy to pursue growth opportunities abroad and also complements our continued strategy of providing to our users a comprehensive selling and convenient buying platform,” said Ku Young-bae, Gmarket’s chief executive.
South Korean internet companies have been looking overseas as they seek new sources of growth, with the domestic market approaching saturation. Daum acquired Lycos, the US-based English language portal, for Won111.2bn in 2004.
At the same time, South Korea’s fast-growing internet shopping malls have drawn interest from international players. Ebay, the online auctions provider, took over local provider Internet Auction in 2004 for $4.3bn.
Gmarket, which sells a wide range of products from clothes to computers on its website, reported a net profit of Won4.3bn last year on sales of Won71.3bn.