eBay Buys into Korean Market

eBay (Nasdaq: EBAY) said Sunday it will spend about US$120 million to buy a majority stake in Internet Auction Co. Ltd., Korea's largest auction Web site, giving the U.S. online auction giant a foothold in one of the world's biggest e-commerce markets.

The companies said the deal "combines two Internet pioneers committed to expanding online trading throughout Asia." The South Korean company has about 2.8 million registered users and hosted 465,000 new listings in November.

With about one-third of its citizens online, South Korea is the sixth-largest Internet market in the world, according to eBay. Internet Auction, which launched its service in April 1998, was the first company to enter the online auction market in the country.

International Push

eBay said the deal opens access to markets that together comprise nearly two-thirds of the world's e-commerce revenue. eBay is reportedly the No. 1 online auctioneer in the U.S., UK, Germany, Canada and Australia, and also operates sites in France and Japan.

"This is a great match for us and a significant step forward for our global strategy," eBay president and chief executive officer Meg Whitman said.

Internet Auction co-chief executive officer Keum Ryong Lee called the deal "a wonderful next step for our business, our users and shareholders," adding that "our users, in particular, should gain tremendous value from the ability to trade globally that this deal guarantees."

Purchase Details

eBay said it will purchase "slightly more than 50 percent" of Internet Auction's outstanding shares from majority shareholder Sung Moon Kwon and two other companies in which he holds significant interests. eBay will pay 24,000 won (US$18.99) for each Internet Auction share, for a total value of about $120 million.

The deal is scheduled to close in the first quarter, after receipt of government, regulatory and board approvals.

Internet Auction expects sales of 68 billion won (US$53.8 million) for 2001, and is predicting a break-even year.

Boosting Revenue, Not Profit

eBay said that the deal will add about $20 million to its revenue for 2001, while lowering pro forma earnings per share by about a penny.

eBay, one of the few companies in the e-commerce industry to boast a profit, recently began a television ad campaign to boost brand awareness in the United States.