EBay Boosts Presence in Asian Auction Scene
Sep 1, 2004 9:49 AM PT
EBay moved to shore up its presence in Asia, announcing that it increased its stake in South Korea-based Internet Auction Co. in a deal worth $325 million and also launched improvements to its Chinese subsidiary.
EBay said it had agreed to buy just under 3 million shares in Internet Auction Co. from a group of institutional investors. That stake represents about 23 percent of the total outstanding shares of the company and will boost eBay's ownership to more than 85 percent from around 62 percent.
The auction giant also said it would make tender offers in Korea in "coming weeks" that could result in it acquiring all of the company, in which case it would be taken private. It would cost eBay around $530 million to buy all of the publicly held shares of the company.
EBay spokesperson Chris Donlay told the E-Commerce Times that taking the company private would "reduce the complexity" of running two public companies in different jurisdictions. He said the company would continue to be run under the Internet Auctions brand for the foreseeable future.
EBay said the deal would not affect its earnings outlook for the rest of the year. EBay shares were up nonetheless in early trading Wednesday, rising 38 cents to $86.92.
Where the Growth Is
Also on Wednesday, reports out of China said that eBay was preparing to connect EachNet, the auction site in that country that it bought in 2002, with the eBay platform, giving Chinese Internet users the ability to trade across other eBay sites.
International expansion is seen by many as key to eBay's ability to continue its impressive growth trajectory and to meet ambitious revenue and profit goals that it has set for itself.
Donlay said Korea in particular is a ripe market for near-term growth.
"There is a lot of broadband usage and Internet usage that is among the highest in the world," he said. He noted that the company has already seen growth since eBay first bought a 50 percent stake in 2000, which prompted the decision to boost that holding to 62 percent last year and now to move to own the entire company. "We've already seen nice growth there."
But Asia in general has been eyed by eBay as a place where the type of double-digit annual growth in e-commerce and Internet use that the United States enjoyed in the late 1990s and earlier in this decade can possibly be replicated.
That is not likely to happen overnight, however. Doing business in China can present many barriers for U.S. companies, from language issues to an ever-changing regulatory environment that has at times been unfriendly if not hostile toward non-Chinese companies.
More than Auctions?
Speaking to shareholders at eBay's annual meeting earlier this summer, CEO Meg Whitman said the company "refused to leave China" because of the opportunities there.
EBay has often used strategic acquisitions to grow its business, particularly internationally. Already this year, it moved to beef up its German presence by acquiring privately held Mobile.de, which helps users sell cars online, and in June it bought Baazee.com, which is based in India, another market that analysts say is poised to see an explosion in Web use over the next decade.
Others have followed eBay's lead. Most recently, Amazon.com said on Aug. 19 that it had bought Joyo.com, China's largest online retailer, for $75 million in cash.
Importance of Growth
Forrester analyst Carrie Johnson said overseas growth is important to eBay, Amazon and others for another reason.
"While some of their U.S. customers are true fans, half have little or no loyalty," Johnson told the E-Commerce Times. "That means they'll go where the prices are lower and the service better."
That in turns means that despite their dominance in the e-commerce space, they are somewhat vulnerable to competitive threats.
While it continues to win over fans for its auction platform -- and has spawned a booming cottage industry of drop-off sites that aid sellers in listing on eBay -- there are signs that eBay is looking to foster growth by expanding its reach in other ways.
Last month, it made an unusual foray beyond the auction realm when it bought a 25 percent stake in Web listing and community site Craigslist. That deal gives eBay a presence in the rapidly growing $1 billion market for online classified listings.