Good move, eBay (NASDAQ:EBAY).
I've been cynical when it comes to the struggling online marketplace giant lately, so I owe it to the company to break into applause when it does something right. According to Korea's eDaily news service, eBay is buying a 34.2% stake in Gmarket (NASDAQ:GMKT).
This isn't exactly breaking news. Interpark has been looking to unload its chunky stake in Gmarket for well over a year. The original list of potential buyers included SK Telecom (NYSE:SKM) and Yahoo! (NASDAQ:YHOO), but eBay has always been the company that stands the most to gain with Gmarket on its arm.
After all, eBay's the one posting organic declines in marketplace revenue globally. It's also the one that made dubious claims of market-share gains in South Korea. It was no surprise to see eBay approach the Korea Free Trade Commission last summer, seeking regulatory approval before making its move.
If the news proves accurate, then waiting will have paid off for eBay. It will supposedly pay $24 a share for Interpark's 34.2% piece of Gmarket. The original price being tossed about last year was closer to $29 a share, before the bottom fell out of the equities markets worldwide.
This isn't necessarily a prelude for a complete buyout of Gmarket. eBay has had an 18% stake in South America's MercadoLibre (NASDAQ:MELI) and a 25% piece of Craigslist for years. Sure, it has also swallowed several exchanges whole, but it doesn't appear to have a problem in simply settling for a thick slice of the pie. eBay can now make a play for Yahoo!'s 10% stake in Gmarket, but it certainly doesn't need to buy it all.
$24 isn't a screaming bargain. It values Gmarket at 28 times this year's earnings and 23 times next year's projected profitability. However, it's an investment that helps eBay save face in an important Web-savvy nation, while shedding a little more light into the inner workings of competitor that appears to have the upper hand with the locals.
In short, it's a cover charge for regaining global respect. That kind of transaction rarely comes cheap.
More items in the eBay bid basket:
- eBay has had a thing for Gmarket since last summer.
- Things just haven't been the same since Meg Whitman went away.
- It's So Much Worse Than You Think
