EBay to buy stake in S. Korean online marketplace

[April 16, 2009]  SEOUL, South Korea (AP) -- EBay Inc. said Thursday it plans to pay as much as $1.2 billion for control of South Korea's top online marketplace, potentially one of the company's largest acquisitions as it moves to expand in Asia.

San Jose, Calif.-based eBay and Gmarket Inc. said that eBay will make a cash tender offer of $24 a share to purchase all outstanding common shares and American depository shares in the South Korean company.

The final purchase price could reach $1.2 billion if all shares are tendered, the companies said in a release. EBay would take a stake of at least 67 percent, they said, based on tender agreements reached so far with Gmarket management and shareholders and new shares the South Korean company will issue.

The deal comes as eBay struggles with declining earnings and revenue amid the U.S. recession and just two days after it announced the planned spinoff through an initial public offering of Internet communications service Skype, which it acquired in 2005 for $2.6 billion.

EBay said it sees a bigger presence in Internet-savvy South Korea -- the world's sixth-largest e-commerce market -- as a way to tap Asia's growth.

"Asia is a very fast moving market, fast growing market," John Pluhowski, an eBay vice president, said in Seoul. The proposed acquisition "also allows us to build a platform for growth in Korea but also in regions throughout Asia and beyond."

Pluhowski said the acquisition would be "one of the largest since the company has been acquiring companies throughout the decade."

Besides Skype, another high-profile acquisition for eBay came in 2002 when it bought online payment service PayPal for $1.3 billion.

EBay and Gmarket, which is unlisted in South Korea, said that they had agreed for the U.S. company to combine Gmarket with eBay's existing online marketplace in South Korea, Internet Auction Company, or IAC.

"The combination of Gmarket and IAC establishes an exceptionally strong leadership position for eBay in one of the world's largest, most dynamic and innovative e-commerce markets," John Donahoe, eBay's president and chief executive officer, said in the release.

South Korea is the world's sixth-largest e-commerce market after the U.S., Germany, the United Kingdom, China and Japan, the release said. EBay acquired IAC in 2001.

Park Joo-man, South Korean country manager for eBay, said that Gmarket and IAC had a combined market share of about 36 percent in South Korea as of last year.

EBay and Gmarket said Thursday that they expect the deal to be closed during the second quarter of this year, contingent on the tender of the majority of outstanding shares and final regulatory approval in South Korea.

A special committee of Gmarket's independent directors recommended approval of the transaction to the company's board, the release said. Gmarket was founded in April 2000 and listed on the Nasdaq exchange in the U.S. in June 2006.

A Korea Fair Trade Commission official said the antitrust watchdog will review the deal, though approval is expected as long as it conforms with conditions specified in a preliminary approval eBay won last year. The official requested anonymity because he is not authorized to speak on the record.

EBay announced in September that it had received preliminary approval for its potential purchase of a stake in Gmarket. At the time, the deal was focused on eBay acquiring what it said was 37 percent of Gmarket shares held by South Korean online shopping site Interpark Corp. and its chairman, Lee Ki-hyung.

EBay and Gmarket said Thursday that Interpark and Lee had signed tender agreements to sell their approximately 34 percent stake in Gmarket.

Separately, Yahoo Inc. announced that it has agreed to sell its approximate 10 percent stake in Gmarket to eBay as part of the tender offer. Yahoo said it would maintain its other operations in South Korea following the sale.

The proposed deal comes as South Korean President Lee Myung-bak, a former businessman, has called for more foreign investment in Asia's fourth-largest economy since taking office last year.

Some overseas companies have complained in the past that their investments and acquisitions have been hampered by anti-foreign sentiment among the public, government and media. U.S. buyout group Lone Star Funds, which purchased a South Korean bank in 2003 and has been trying unsuccessfully to sell it, has been the most vocal critic.

[Associated Press; By KELLY OLSEN]

Associated Press Writer Jae-soon Chang contributed to this report.

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