Ebay To Acquire Gmarket For $1.2B

Online auction company eBay Inc. announced late Wednesday, April 15, that it will pay up to $1.2 billion to buy South Korean rival Gmarket Inc. in a bid to expand its Asian operations.

The purchase price will be up to $1.2 billion if all outstanding shares are tendered. EBay said it has already secured agreements to purchase at least 67% of the Gmarket's shares

from investors including Yahoo! Inc. and Interpark Corp. and will make a general offer of $24 per share for the balance of the shares.

The price represents a 20% premium to Gmarket's closing price of $19.96 on Wednesday.

Gmarket will be combined with EBay's Seoul-based unit Internet Auction Co., more than doubling the U.S. company's South Korean sales and building a platform for expansion in Asia.

"This deal creates strong operational synergies between the two market leaders, offers more opportunities for sellers and enhances our ability to serve complementary consumer segments," eBay chief executive John Donahoe said in a statement.

Yahoo! said in a separate statement it agreed to sell its 10% stake in Gmarket and will continue to maintain its other operations in South Korea following the sale. Yahoo! purchased its stake in Gmarket in June 2006 from venture capital firm Oak Investment Partners for $60 million.

In addition to Yahoo!, South Korea's Interpark and its chairman, Ki Hyung Lee have also accepted the tender offer, eBay said. Interpark and Lee together hold around 34% of Gmarket's shares.

Interpark noted that it will sell its 14.6 million shares of Gmarket to eBay for $350 million. The acquisition bid has also won the backing of Gmarket CEO and President Young Bae Ku, the company said.

Interpark said in a statement it plans to focus on its existing online retail business and invest in new operations.

South Korea is one of the world's most connected societies and eBay wants to consolidate its position there. During 2008, Gmarket earned revenue of $220.8 million, compared to $161.2 million earned by Internet Auction Company. EBay acquired IAC in 2001.

Gmarket's board of directors has voted unanimously to approve the deal and is recommending that Gmarket security holders accept the offer. Cowen and Company LLC provided the board and a special committee with a fairness opinion, according to a regulatory filing with the Securities and Exchange Commission. The filing also noted that no other financial advisers or investment bankers were involved in the transaction.

San Jose, Calif.-based eBay expects to close the deal during the second quarter pending the tender of a majority of the outstanding shares and American depositary shares of Gmarket on a fully diluted basis and final Korean antitrust approval.

EBay's bid for Gmarket follows the announcement it will spin off its telephony unit Skype to refocus its efforts on its core e-commerce and online payment businesses. EBay plans to take Skype public in an initial public offering next year, but has not revealed the timing of the deal.