eBay (NASDAQ:EBAY) announced yesterday that it will purchase the remaining 50% stake of Internet Auction Co. that it doesn't own already. Stock of the firm -- the leading online auctioneer in South Korea -- was up more than 100% this year before jumping again on eBay's 25%-premium offer.

Having bought a majority of the company in Feb. 2001, eBay will acquire the rest for approximately $380 million in cash -- a large purchase, but not huge, given eBay's $1.58 billion in cash and equivalents.

Ownership of Internet Auction Co. offers eBay full exposure to South Korea's fastest-growing e-commerce story. The company expects to surpass gross merchandise sales of one trillion Korean won in 2004, the first Korean e-commerce firm to do so.

For 2004, Internet Auction Co. expects 86 billion won in sales (that would quickly put eBay at its 2005 sales goal of $3 billion -- were that goal in won), which equates to $73 million, and makes for a small piece of eBay's $2.1 billion 2004 sales estimate. The company expects 2004 profits of 20 billion won, or about $17 million, putting its net profit margin at 23%, and pricing eBay's buyout offer at 44 times forward earnings.

Whatever image you have of South Korea, you probably wouldn't that it has the highest broadband penetration in the world at 23% of households. This works both for and against eBay: It means more people are online with fast connections that make commerce easy, but fewer new online customers remain to be tapped. Still, growth should not be a problem for the "eBay" of South Korea.

As of September, Internet Auction Co. had 7.3 million registered users and 1.4 million items for auction. South Korea has a total population of approximately 50 million adults and children.

Although U.S. sales account for a majority of eBay's revenue, its fastest-growth is overseas, and with the goal of operating in at least 25 countries by 2005, eventually international business could account for a majority of all revenues -- as is already the case with Coca-Cola (NYSE:KO), McDonald's (NYSE:MCD) and eventually Starbucks (NASDAQ:SBUX).

eBay expects $2.1 billion in sales next year and $0.98 in earnings per share. Consensus analyst estimates call for $1.03 in 2004 EPS. The $52 stock trades at about 51 times that estimate, a modest premium to the expected growth rate. It's equally attractive on its free cash flow growth rates.

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