US online shopping giant eBay is struggling to offload its South Korean unit.
Sources within the e-commerce industry believe there are a few large retail companies that could potentially buy the Ebay South Korea business due to its large size.
They estimate the business could potentially be worth 5 trillion won (US$4.18 billion), based on about one third of the company’s 16 trillion won in annual transactions.
Ebay Korea is the country’s largest e-commerce company, with major online shopping malls such as Gmarket, Auction and G9 under its arm. Their share is estimated to account for around 12 per cent of the local market.
The acquisition of Ebay Korea, which is one of the few profitable e-commerce businesses in South Korea which is profitable, would quickly make the purchaser one of the nation’s top players.
There are few large retail companies that could afford such a large-scale acquisition, thus Lotte and Shinsegae have emerged as potential buyers.
Lotte, which has yet to start its e-commerce business in earnest, was mentioned as the most prominent suitor. However, the company has reportedly ruled out a bid.
“When Lotte was considering acquiring TMON Inc for 2 trillion won, it was said that negotiations broke down over the price,” an industry source said. “The valuation of Ebay Korea at 5 trillion won is too much.”
“Ebay has a structure that makes profits by acting as a bridge between consumers and sellers through online market brokerage,” said Nam Sung-hyun, a researcher at Hanwha Investment & Securities Co.
“However, Ebay needed to invest in related infrastructure in the process of transforming the purchasing product group into food, but the company failed to implement it properly, losing its competitive edge,” Nam added.