Online auctioneer eBay Inc. last week announced that it will acquire a majority stake in South Koreas largest auction Web site for about $120 million in cash.
The acquisition of Internet Auction Co. Ltd. will open eBays global marketplace to Internet Auctions community of 2.8 million registered users, according to officials at eBay, in San Jose, Calif. In November, Internet Auction hosted 465,000 new products and services.
Launched in April 1998, Internet Auction expects 2001 sales of 68 billion won, or about $54 million. Excluding noncash charges and one-time costs, the company had anticipated almost breaking even operationally this year.
According to research provided by eBay, the Korea Network Information Center estimates that South Korea is the sixth-largest Internet market in the world, with more than 16 million people—one-third of the countrys population—online.
In addition to its U.S. site, eBay was already operating in the United Kingdom, Germany, Austria, France, Canada, Australia and Japan before this latest acquisition.
eBay is using a portion of its almost $900 million in cash reserves "to gobble up and force the smaller players out of the Korean market," said Andrew Ari Clibanoff, an analyst at Jupiter Media Metrix Inc., in New York. "Its a pre-emptive strike [because] competing vendors dont have the cash reserves to do it."
Although Clibanoff believes that eBay paid a heavy premium for Internet Auction, he said the deal will be "highly profitable" for the company because Internet Auction charges sellers almost three times in commissions what eBay charges.
The transaction is expected to close this quarter, pending shareholder and regulatory approval. Internet Auction will continue to trade on the Korean KOSDAQ stock market.