Naver withdraws bid for eBay Korea stake

Naver, the country’s dominant web portal, has decided to drop out of a high-profile bid to acquire a stake in eBay Korea.

“Naver had considered acquiring a partial stake in eBay Korea to strengthen the company’s business competitiveness,” the web portal said in a regulatory filing to the Korea Exchange (KRX), Tuesday. “However, Naver decided not to participate in the acquisition process.”

Naver’s withdrawal came five days after it said it would pursue the acquisition of eBay Korea with Shinsegae Group. Shinsegae and Naver established a retail and e-commerce alliance in March this year by purchasing stakes worth 250 billion won in each other’s affiliates.

Naver’s decision on Tuesday left Shinsegae Group as the only bidder for eBay Korea. EBay’s board approved Shinsegae as the sole candidate for the acquisition of a 100 percent stake in eBay Korea, and the country’s top retail conglomerate is said to have offered around 4.4 trillion won ($3.9 billion), which is well below the 5 trillion won eBay headquarters hoped to receive, according to sources familiar with the issue.

Naver officials declined to elaborate on why the company decided to drop out of the bidding. However, investors and analysts speculated the move was due to concerns over market monopoly that Naver could face, because the deal would have to be approved by the Korea Fair Trade Commission (KFTC), the country’s top antitrust regulator.

Naver is the country’s top e-commerce company accounting for an 18 percent market share as of the end of last year. In comparison, eBay Korea accounts for 12 percent and rival Coupang 13 percent, according to market tracker Euromonitor and market research firms.

“Naver’s management reached a consensus that the KFTC might block the deal given its already strong position in the local e-commerce market,” an industry executive said by telephone. Shinsegae accounts for around a 3 percent share of Korea’s e-commerce market.

Naver’s withdrawal will put pressure on Shinsegae Group in terms of financing. Shinsegae is said to have asked Naver to pay around 1 trillion won to complete the joint acquisition.

“Shinsegae is in talks with eBay headquarters to acquire an 80 percent stake in eBay Korea,” the executive said.

The sale of eBay Korea will lead to major changes in Korea’s e-commerce industry, propelling one of the top brick-and-mortar retailers to become the leading online store here. EBay Korea accounts for around 11 percent of eBay’s global sales. Launched in 2000, eBay Korea grew rapidly and achieved an operating profit of around $75 million last year.