Emart buying eBay Korea for $3 billion

Logos of Shinsegae and eBay. Shinsegae Group's Emart has agreed to buy eBay Korea. [NEWS1]

Emart is acquiring 80 percent of eBay Korea for 3.44 trillion won ($3.05 billion), significantly raising its presence in the market and becoming a top-ranked e-commerce player overnight.

Emart “plans to sign a share purchase agreement with eBay Inc. to acquire shares of eBay Korea,” the company said in a statement on Thursday.

“Acquisition of eBay [Korea] will be a starting point to transform Shinsegae Group’s business to be centered online,” said Emart, which is part of the Shinsegae Group.

Emart said it will be able to gain 2.7 million paid users from eBay Korea, more individual sellers and IT experts through the acquisition.

eBay Korea runs open market platforms Gmarket and Auction.

“The basis for making the decision is not about its price, but about what it can become,” said Chung Yong-jin, Vice Chairman of Shinsegae Group in a statement.

The acquisition is expected to significantly raise Emart’s presence in the online market, in which it has struggled to expand rapidly.

SSG.com, Emart’s online entity, only had 2 percent of the e-commerce market in Korea as of last year, according to data from Kyobo Securities. eBay Korea had 12 percent, ranking third after Naver, with 17 percent, and Coupang, with 14 percent.

Once the acquisition is complete, 50 percent of Emart sales will be generated online, according to the company.

Emart said it will invest 1 trillion won to build logistics facilities over the next four years to manage the inventory needed for online orders.

“Whether the 3.4 trillion-won acquisition price is expensive or not cannot be determined at this point,” said Prof. Jung Yeon-seung, who teaches business at Dankook University. “It will be determined years later based on how much synergy Shinsegae Group manages to generate with eBay Korea while also preserving its strengths.”

Jung added Shinegae Group is expected to independently run eBay Korea for now, but may later consider integrating its online platforms.

“Through the acquisition, Naver, Coupang and Emart will become the three major e-commerce players that will dominate 80 percent of the market,” said Prof. Seo Yong-gu, who teaches business at Sookmyung Women’s University. “The rest of the players are expected to run specialized shopping websites, like those selling seafood.”

But Seo said the domination by the three players could be upset if Amazon enters the Korean market.

Amazon is currently in talks with 11st, an e-commerce platform with around a 6 percent market share, to sell its products in Korea on 11st.

Before Emart’s Thursday announcement, several retailers expressed interest in buying eBay Korea because it was seen as the last opportunity for some to join the major leagues of online shopping.

Lotte Shopping, which bid in the June 7 auction to take over eBay Korea, walked away from the deal.

It said creating synergy with eBay Korea would be more difficult than it had expected. It said it will concentrate on acquisitions.

Lotte Shopping runs e-commerce platform Lotte On, which had 5 percent market share last year.

It reportedly bid around 3 trillion won to buy eBay Korea, while Emart bid around 4 trillion won in a consortium with Naver.

Naver said it was interested in buying eBay Korea, but announced Wednesday that it decided to walk away from the deal.

BY JIN MIN-JI,[jin.minji@joongang.co.kr]