Amazon buys Dubai-based Souq.com
IT’S REGION’S BIGGEST TECHNOLOGY MERGER AND ACQUISITION TRANSACTION — GOLDMAN SACHS
The world’s online retailing giant Amazon has secured a presence in the Middle East by acquiring Dubai-based Souq.com in a deal announced yesterday. The many internal processes associated with completion of the deal — the value was not disclosed — will be done before the year is out, top officials said.
Despite the value not being disclosed, Goldman Sachs, which advised on the deal, called it “the biggest-ever technology M&A transaction in the Arab world”.
With Souq.com in its fold, Amazon has further expanded its reach in Dubai. Recently, its cloud services operations were launched here through an association with Dubai Investment Development Agency.
The Amazon presence was highlighted in a series of tweets put out by Shaikh Hamdan Bin Mohammad Bin Rashid Al Maktoum, Crown Prince of Dubai.
“Amazon acquisition of Souq reflects vision of @HHShkMohd who launched Internet City in 1999 & enacted e-commerce laws in 2002,” said one tweet.
“Furthermore, it reiterates Dubai’s position as a regional and global hub for the world’s leading corporations,” said another. And “We are happy that http://souq.com is a success story born in Dubai.”
Indeed, the Amazon deal lays down a marker for a further rapid expansion of the Middle East’s ecommerce space, and which will also see the imminent launch of Noon.com, a venture in which Mohammad Alabbar of Emaar Properties is a key investor.
Souq.com, which will retain its identity for the time being, will continue to focus on its existing markets before trying to tap new ones, officials said.
30m
is estimated number of items that Amazon stocks, while Souq.com has 8m plus products
Amazon prevailed over a late challenge from Emaar Malls to pick up 100 per cent of Souq.com, the regional leader in the e-retailing space. The value of the deal has not been revealed, or whether it was done through a mix of cash and stock options.
Souq.com’s current management will remain in place, including the CEO Ronaldo Mouchawar, who is one of the co-founders. The online portal will retain its identity as well, at least for the time being.
Retaining the Souq.com branding as opposed to introducing one with “Amazon” in it is interesting. In most of its other non-US territories, Amazon operations go by this name.
But there was plenty of action even before the deal was announced yesterday afternoon.
It was last week that Emaar Malls announced it was interested in a Souq.com acquisition, raising the stakes by offering $800 million (Dh2.93 billion) and including a $500 million convertible deposit.
That offer came as speculation about Amazon closing in on a Souq.com deal was rife, with its offer being $600 million according to speculation that was doing the rounds. There were some industry sources who said it could be possible that Souq. com’s founders — which included New York-based Tiger Global and South Africa’s Naspers — might take more time before deciding which way to go.
But Mouchawar said the strategic fit a tie-up with Amazon offered made it the right deal to pursue ... and close.
Shareholders all on board
“We shared so much in common values and had the same outlook on customer focus, using technology and innovation. Souq and Amazon share the long-term thinking and that was the driving factor to the partnership.
“All shareholders are on board for the deal, which is what was good for the employees as well. We continued discussions with Amazon and at the right time the deal was announced.”
It was earlier this year that talk started about Amazon’s interest in Souq.com.
At the time, a valuation of $1 billion was mentioned. In between, it was thought that Amazon had stepped back from a deal before putting its hat back in the ring all over again.
Amazon and Souq.com officials declined to say whether the former subsequently raised its offer to match Emaar Malls’, or how it was structured.
“Actually, since the company [Amazon] is large enough, it will be included in some level in our [regulatory] filings,” said Russell Grandinetti, senior vice-president, International Consumer at Amazon. “But it’s not clear at this stage that it will be disclosed.”
Entry point
For Amazon, there is much to be had from the buy. This eases its entry into a region where it has been unrepresented and potentially opens up future possibilities outside of the Gulf markets and North Africa.
On whether there is a particular timeline in which the deal needs to be completed, Grandinetti said: “I would say as fast as possible and as slow as necessary. There will be a little bit of work before we close it ... but that’s a formality. “It’s important that we listen to the team here and learn, and don’t change anything about what made them successful. The whole leadership will stay in place and remain focused on what they want to work on.
“But if there is any piece of technology, process or experience developed somewhere else in the world, we will be happy to bring it in as quickly as we can.”
There are no immediate plans to add new territories in the region to Souq.com’s coverage in a post-deal scenario.
“Just making progress in the markets Souq is in the near term, there’s plenty of business,” said Grandinetti. “In time, we will look elsewhere in the region.”
Currently, the UAE and Saudi Arabia are the prime markets, while it is also seeing momentum in Egypt.
In the short-term, the online vendor is predicting “massive growth” in Saudi Arabia.
“With the Amazon partnership, we will have access to global supply, much better technology and will shorten the delivery time,” said Mouchawar.