TMON suitors stake out positions

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TMON suitors stake out positions


Amid stiff competition in the mobile and online commerce landscape, Korea’s first homegrown daily deals site, TMON, is up for sale and interested parties are engaging in a subtle battle of nerves.

American deals giant Groupon, which owns TMON, expressed its intention to sell the e-commerce site in October.

Domestic companies passionate about the e-commerce business are throwing their hats into the ring. The bidding race for TMON got complicated as CJ O Shopping, a major TV home shopping network, showed interest.

The home shopping network confirmed on Thursday that it submitted a letter of intent last month. Currently, mobile carrier LG U+ and American private equity firm KKR are shortlisted for the deal.

Groupon bought the Korean online retailer for 275 billion won ($255.2 million), but industry sources now estimate the value of TMON at 1 trillion won.

LG U+ said in a regulatory filing last week it had submitted a letter of interest. But the company spokesman declined to comment further, saying it’s an ongoing process.

Groupon chose Deutsche Bank to work on the sale and the bank is scheduled to announce a preferred bidder at the end of this month.

There is believed to be two other bidders, according to multiple media outlets, but both TMON and Deutsche Bank declined to identify them.

The two Korean bidders - LG and CJ - also want to manage the site, say several local media reports.

Founder Shin Hyun-sung has served as CEO of the company since Groupon bought TMON last year. The two sides completed the deal in November 2013 and the Fair Trade Commission approved it two months later.

It was the second acquisition of TMON after the site was taken over by another U.S. online marketplace - LivingSocial - in 2011.

Groupon Korea entered the Korean market in 2011, but the business had not been successful up to the time the decision to sell was announced.

That appears to stem from the company’s efforts to slim down.

“We need to set that business up for success,” said Eric Lefkofsky, founder and CEO of Groupon, in October when the company reported third-quarter results.

“And again, we just can’t be as aggressive as we’d like to be in 47 markets at one time. TMON is growing faster than we thought, and it has the potential to be the leader in e-commerce in Korea,” he said. “We’re not looking to sell all of TMON. We love the business and obviously you can never tell where these things will go, but we’d like to be a shareholder for a long time.”

Some observers presume that Groupon’s withdrawal is the result of fierce competition.

Once the top online deals site, TMON is No. 2 to Coupang. The dominance of Coupang recently accelerated with an improved delivery system and a series of large investments from Silicon Valley.

Coupang raised $300 million last month in a venture round led by BlackRock Private Equity Partners in Silicon Valley.

The company said the money will go toward securing resources for technology-powered logistics and the e-commerce platform that has been its focus in recent years.

The investments came seven months after the online retailer received $100 million from American venture firm Sequoia Capital.

Coupang said that funding would go toward developing its e-commerce platform and delivery infrastructure. The company has five distribution centers.

Established in 2010, TMON enjoyed its heyday through 2011.

Founder Shin, who graduated from the Wharton School of the University of Pennsylvania, established the website when he was 25.

Sales increased tenfold from 2010-11, then began to slow as competitors arrived on the scene.

Retailers still believe e-commerce holds the key to the future and can create synergy with IT technology, the main reason why TMON attracted different interesting bidders.

The market for small online shops has greatly increased. They took in an estimated 8.7 trillion won in transactions last year, according to Statistics Korea.

In 2010, the market was valued at 6.2 trillion won.

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