Ama­zon Snags Souq in Largest MENA Exit

Arabnet - The Quarterly - - Content -

Months of ru­mors cir­cu­lat­ing the Mid­dle East e-com­merce sec­tor cul­mi­nated in Ama­zon ac­quir­ing Souq.com for an es­ti­mated $650 mil­lion. Talks orig­i­nally be­gan in Novem­ber 2016 when Bloomberg re­ported that Ama­zon con­sid­ered ac­quir­ing the Dubai based e-com­merce mar­ket­place for a whop­ping $1 bil­lion. Then in Jan­uary, Ama­zon walked away from the deal with Souq, ap­par­ently due to a dis­agree­ment over val­u­a­tion. That fol­lowed with spec­u­la­tions that Ma­jid Al Fut­taim Hold­ing was con­sid­er­ing ac­quir­ing Souq. Then the saga ended on March 28th 2017 when Ama­zon con­firmed in a short state­ment the ac­qui­si­tion of Souq.com for an undis­closed amount, af­ter suc­cess­fully pre­vent­ing a bid by Emaar Malls – which was re­ported to be in the range of $650 mil­lion. This marks the largest exit from the MENA re­gion to date. As part of the deal, Ama­zon has also agreed to ac­quire Pay­fort, an on­line pay­ment plat­form for e-com­merce that has been Souq.com’s pay­ment plat­form since its in­cep­tion. Early in 2016, Souq closed a fund­ing round of $275 mil­lion from Tiger Global and Naspers, as well as some strate­gic in­vestors, in­clud­ing Stan­dard Char­tered Pri­vate Eq­uity, IFC (a mem­ber of the World Bank Group), Bail­lie Gif­ford, and other tech­fo­cused fi­nan­cial in­sti­tu­tions. That round in­creased Souq’s val­u­a­tion to a $1 bil­lion with a to­tal of $425 mil­lion raised since it was founded in 2005. Con­sid­er­ing all of that, a $650 mil­lion ac­qui­si­tion doesn’t look so al­lur­ing how­ever, it is sig­nif­i­cant and will shake up the re­gion’s grow­ing e-com­merce sec­tor and the ecosys­tem’s de­vel­op­ment. The ac­qui­si­tion of Souq gives Ama­zon a head start in the re­gion rather than build­ing from the ground up. Buy­ing Souq pro­vides Ama­zon with an ex­ist­ing cus­tomer base, ac­cess to re­gional mer­chants and ex­ist­ing in­fra­struc­ture. Souq cur­rently sells over 2 mil­lion prod­ucts in ad­di­tion to a newly in­tro­duced global bookstore of 6 mil­lion books and an on­line gro­cery plat­form, in­tro­duced in Novem­ber. Ad­di­tion­ally, with Pay­fort, Ama­zon se­cures the pay­ments in­fra­struc­ture.

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