Largest tech deal in the Arab world
Amazon buys Middle East online retailer souq.com
Souq.com will expand its workforce and operations after Amazon clinched a deal to buy the Middle East online retailer, executives from both firms said.
Amazon and Souq.com said earlier on Tuesday they had agreed on the takeover, despite an eleventh-hour bid by Dubai billionaire Mohamed Alabbar’s Emaar Malls to cut in with an offer it said was worth $800 million.
Executives have not disclosed the value of the Amazon deal, which adviser Goldman Sachs called “the biggest-ever technology M&A transaction in the Arab world”.
Sources with knowledge of the takeover said Amazon was paying less than Emaar’s offer, making it lower than Souq.com’sSouq.com s $1 billion valuation when it sought funding last year.
One source said Souq. com would have broken an exclusivity agreement with Amazon if it accepted Emaar’s bid at this stage.
“Amazon is a great fit with us. We have a lot of common values and it is all about innovation, technology and the type of customer experience and thinking that Amazon has,” Souq.com Co-Founder and Chief Executive Ronaldo Mouchawar told Reuters. Souq.com, founded in 2005, stocks 8.5 million items on its website and generates about 50 million monthly visits, Mouchawar said. It delivers to the six Gulf Arab states and Egypt. Mouchawar said there was scope to expand the business with Amazon and to increase the 3,000-strong workforce to boost Souq.com’s reach, without saying by how many it would rise. “We will continue to invest in our segment and grow our markets,” he said at Souq.com’s Dubai headquarters. Despite its young, tech-savvy population, shoppers in the Middle East still prefer to shop in stores. Online retail accounts for less than 1 percent of total sales in the Middle East, according to market researcher Euromonitor International. “We want to figure out how to grow the team here. If we’re going to grow the business we have to grow logistics, we have to grow technical development,” Amazon Senior Vice President Russ Grandinetti said.
In a document regarding the deal seen by Reuters, Goldman Sachs said the acquisition would accelerate Amazon’s entry into “attractive Middle East countries with significant growth potential.”
After the Amazon takeover, Middle East consumers will be able to buy products available on Amazon through Souq.com, and Middle East merchants will have access to a wider market via Amazon’s network.
The acquisition is expected to close later this year.
Souq.com’s current shareholders include South Africa’s Naspers Ltd and Tiger Global Management.
The Amazon deal was welcomed by the Dubai government, which is increasinglyinc focusing on technology,og as the emirate expands its retail footprintfoo in the region.
Dubai’s Crown Prince Sheikh HamdanHa bin Mohammed bin Rashid al-Maktoumalsaid in a statement it showedsh the city-state’s position “as a ar regional and global hub for the world’swo biggest and leading organizations.”tio
Amazon’s acquisition of Souq.com is seens as significant for the Middle East’sEa nascent technology sector.sec
“This is ef- fectively a vote of confidence in the region. You have a major American company going into a digital company in the region,” said Fadi Ghandour, founder of Dubai-listed logistics firm Aramex and a prominent venture capitalist in the Middle East.
Meanwhile, Amazon also announced to launch AmazonFresh Pickup service from two locations in Seattle, as the online giant attempts to crack into the multibillion dollar grocery market dominated by retail giants such as Wal-Mart Stores Inc.
The service, now open only to employees, allows users enrolled in its Prime service to drive in and pick up groceries from the pickup locations. Amazon Prime members can place the order online and choose a time for the pickup.