eBay, the world's largest and best known internet auction company, has agreed to buy Internet Auction, the largest Korean online auction company, for $120 million in cash. With 2.8 million users, this price equates to almost $43 per registered user.
The deal is the latest example of global internet companies acquiring their Asian counterparts as one of the quickest ways to get growth. Although this deal will increase eBay's 2001 revenue by $20 million, it will actually diminish its earnings per share by $0.002 due to the loss of interest income.
eBay is buying just over 50% of the issued share capital of Internet Auction from Sung Moon Kwon, and companies that he controls. The remaining shares are believed to be held by the management of Internet Auction who will stay on to run the company.
This deal comes shortly after Yahoo! agreed to buy Taiwanese internet company Kimo in December. While some analysts say that the price these two international companies are paying for each user is relatively high, eBay actually managed to buy Internet Auction at a low price.
Internet Auction is listed on the Kosdaq exchange and has been trading at historic lows until recent speculation of the purchase pushed the price up slightly. With a purchase price of W24,000, eBay is paying a very slight premium to Friday's close of Internet Auction's share price of W23,600. This is a 44% discount to Internet Auction's high of W53,900 which was achieved in June. It is thought that the deal is structured as a straight cash purchase with no earn out clauses.
"This transaction highlights the advanced state of the Korean internet sector and the value that is being created in the growth of Asian internet sectors," says Matt Adams, an internet analyst at CSFB in Hong Kong. "Additionally, this acquisition and the recent acquisition of Kimo.com by Yahoo! show that global internet players will often find acquisition a more effective and rapid means of continuing their global expansion plans; we would expect continued acquisitions of Asian internet companies to go forward."
