According to news from The Korea Economic Daily, eBay put its South Korean unit up for sale last week, valued at 5 trillion won ($4 billion).
eBay Korea is the country’s largest online platform that consists of three business units, Gmarket and eBay Auction, and reportedly is profitable and generates about 16 trillion won ($13 billion) per year.
eBay entered the Korean market in 2001 by acquiring Auction CO. Ltd. for $120 million, and in 2009 it expanded with another acquisition of competitor Gmarket for $1.2 billion.
While there is no confirmation from eBay about the potential sale and some companies that were initially thought to be interested also refused comment on the story, The Korea Times reports Coupang might be ready to buy up a controlling interest in eBay Korea.
Coupang is a $9 billion ecommerce business some have dubbed the Amazon of South Korea. The company started in Seoul in 2010, and it boasts a user-base almost half the size of Korea’s population.
The reason Coupang may have jumped to the front of the line to acquire eBay Korea is that analysts believe the company is readying to go public next year on the American Nasdaq stock exchange.
“Coupang is aiming for the Nasdaq listing next year. As a necessary step in terms of expanding its market share, Coupang is expected to grow its corporate size by acquiring major stakes in eBay Korea.”
Hana Daetoo Securities analyst Park Jong-dae wrote in a note to clients.
Analysts believe for Coupang to have a better path to a successful IPO on the Nasdaq, it needs more revenue and demonstrate a path to profitability. In 2018, regulatory filings indicated Coupang had a 1.1 trillion won operating loss on revenue of 4.4 trillion won.
By adding eBay Korea, Coupang could dramatically increase its revenue and shore up operating losses, therefore increase the company’s IPO valuation.
eBay Strategic Review Process Larger Than Thought
Last year several activist investment groups urged eBay management to sell off business units to create better shareholder value and refocus the company on its core marketplace operations.
Then CEO Devin Wenig disagreed with this strategy and it is the primary reason why he left eBay as CEO in September of 2019. Scott Schenkel, CFO at that time, took over as interim CEO.
Schenkel and the eBay board have been reviewing sales of business units, which mostly were thought to be StubHub and the Classifieds Group. Both are marketplaces that are distinctively different from eBay’s core business and not integrated into eBay.com.
Last month eBay completed the first sale with StubHub becoming part of competing events ticket marketplace Viagogo. The company also confirmed it was still in talks with various parties on selling the Classifieds Group.
This is the first time it has become known eBay may also be considering offers for its Korean operation.
While this business unit is known as eBay Korea, it is not a localized version of the eBay.com marketplace, such as eBay.co.uk or eBay.ca.
Instead, eBay Korea is two distinctive platforms focusing on different demographics in the South Korean market, similar to the online platforms under the Classifieds Group.
Therefore, spinning off eBay Korea will have no operational impact on the core marketplace. Likely, eBay would again buy back stock from the proceeds of a sale, which would increase shareholder value.
Neither eBay or any of the potential candidates for eBay Korea have commented on the news reports in the Korean press.
What do you think about how eBay is selling off parts of its business that are not integrated into the core marketplace?
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