Groupon snaps up Ticket Monster

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Groupon snaps up Ticket Monster

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Ticket Monster, one Korea’s leading e-commerce companies, said yesterday it has agreed on a strategic merger and acquisition with Groupon, the world’s biggest social-commerce company.

The M&A will come in the form of Groupon buying LivingSocial Korea, which owns Ticket Monster, for $260 million in cash and stock. The merger is expected to be completed in the first half of next year and is subject to approval by Korea’s Fair Trade Commission.

The deal, under which Ticket Monster becomes a wholly-owned affiliate of Groupon, will put the company, also known as TMON, in a better position for sustained growth in the world’s fastest growing e-commerce market, the company said. The brand and workforce of Ticket Monster will remain after the merger, the company said.

“We are incredibly excited to join a company like Groupon that so closely shares our vision to be an indispensable resource to consumers and merchants,” said Shin Hyun-sung, CEO of Ticket Monster. “Groupon’s scale and expertise in local commerce will pay immediate dividends as we look to further grow our business, and we see tremendous potential in working together.”

Established in 2010, TMON has grown quickly to about 1,000 employees. The Seoul-based company recorded 81 billion won ($76 million) in social commerce sales last year. At the same time, the company is capitally impaired with a net loss that has grown from 2.5 billion won in 2010 to 83.4 billion last year, which left TMON desperate for cash.

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“Ticket Monster is a perfect fit for Groupon as we continue to transition our business globally from a flash sale e-mail model to a mobile commerce marketplace,” said Groupon CEO Eric Lefkofsky. “Ticket Monster has a vibrant and growing marketplace in one of the world’s largest e-commerce markets.

Coupled with outstanding mobile penetration and expertise in local, travel and products, they will help us accelerate our overall growth, provide immediate scale and serve as a cornerstone for our operations in Asia.”

The acquisition of Ticket Monster will make Korea the company’s second-largest market after the United States, said Jason Child, Groupon’s chief financial officer. Groupon said more people are flocking to deals offered on mobile devices as the company transforms itself into a service offering thousands of discounts instead of a deal e-mailed every day.

Groupon reported on Thursday that sales rose 4.7 percent to $595.1 million in the third quarter and a net loss of $2.58 million.

While the revenue missed analysts’ average projections for $615.7 million, the loss was far less than the prediction for $14.3 million, according to estimates compiled by Bloomberg. The quarter marked the first full period under Lefkofsky, who is seeking to turn around the daily deals provider after the Chicago-based company lost more than 80 percent of its value in its first year after going public in November 2011.

“Mobile is doing very well,” said Blake Harper, an analyst at Wunderlich Securities. “And the T- Mon deal - the financials are a little better than expected.”

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Ticket Monster “serves millions of customers with a broad range of products, local and travel offers,” Groupon said. Groupon said Ticket Monster is close to breaking even on an EBITDA basis.

Groupon shares were up 0.8 percent in extended trading. The stock declined 5.1 percent to $9.50 at the close in New York, and is down 50 percent from its 2011 IPO price of $20. By comparison, Twitter rose 73 percent at its market debut today following its initial public offering.

Groupon forecast fourth-quarter revenue of $690 million to $740 million and operating income of $40 million to $60 million. Polled analysts on average estimate sales of $723.7 million and operating profit of $46.1 million.

“It’s going to be tougher for them to grow because the e-commerce space is very competitive,” said Edward Woo, an analyst at Ascendiant Capital Markets, who has a sell rating on the stock. “There’s consumer fatigue; consumers aren’t as interested anymore.”

Child said changes to Google’s Gmail service, which began placing e-mail promotions in a separate tab, caused fewer people to open e-mails touting the company’s daily deals.

“It definitely had some impact on click-through rates,” Child said, adding that seasonality had an impact as well.

Tim Drinan, a spokesman for Google, declined to comment.

Still, Child said Groupon reached a record in mobile usage, with more than 60 million downloads of the mobile application. More than 40 percent of transactions were completed on smartphones and tablets during September, he said.

Groupon makes money by offering discounts - known as Groupons - from businesses such as restaurants and nail salons. It then shares revenue with the merchants.

Earlier this month, Groupon unveiled a redesigned Web site and new mobile apps.

The company now offers a personalized home page with curated collections of deals based on a customer’s interests and prior purchases. The updated mobile software detects when a consumer’s location changes to provide nearby deals.

Groupon has also diversified into new areas. In July, it added an online restaurant-booking service that offers discounted meal, called Groupon Reserve.

“Groupon is hardly standing still, it’s made some fairly dramatic changes in its business model,” said Peter Krasilovsky, an analyst at researcher BIA/Kelsey. “It’s a very different company than the one from a few years ago.”

BY BLOOMBERG, MOON GWANG-LIP [joe@joongang.co.kr]

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