Yahoo accepts eBay offer to buy Korea's Gmarket

Yahoo agreed to sell its stake in South Korean e-commerce site Gmarket on Thursday following eBay's offer to buy the company's outstanding shares, part of a bid to strengthen its presence in South Korea.

Yahoo holds a roughly 10 percent stake in Gmarket. The company agreed to sell its shares to eBay as part of a tender offer to acquire all of Gmarket's outstanding shares for US$24 each. The rest of Yahoo's operations in South Korea will not be affected by the sale, the company said in a statement.

The Yahoo announcement came shortly after eBay announced its desire to acquire Gmarket and merge the company with its own South Korean e-commerce subsidiary, Internet Auction Co. (IAC). To be successful in its bid, eBay needs to acquire 67 percent of Gmarket's shares. If eBay is successful, the cost of the deal could reach US$1.2 billion if all shareholders accept the offer, it said.

EBay expects to close the deal to acquire Gmarket during the second quarter.

EBay's bid for Gmarket follows the announcement it will spin off Skype to refocus its efforts on its core e-commerce and online payment businesses. EBay plans to take Skype public in an initial public offering next year, but has not given an exact date.

In addition to Yahoo, South Korea's Interpark and its chairman, Ki Hyung Lee, which hold around 34 percent of Gmarket's shares, have already accepted the tender offer, eBay said. The acquisition bid has also won the backing of Gmarket CEO and President Young Bae Ku, it said.

South Korea is one of the world's most connected societies and eBay wants to consolidate its position there. During 2008, Gmarket earned revenue of US$220.8 million, compared to $161.2 million earned by IAC. EBay acquired IAC in 2001.

"This deal creates strong operational synergies between the two market leaders, offers more opportunities for sellers and enhances our ability to serve complementary consumer segments," said John Donahoe, eBay's president and CEO, in a statement.

How well the eBay will do in South Korea over the long term remains to be seen. EBay has struggled to recreate its U.S. success in Asia. In recent years, the company has fought and lost high-profile bids to dominate the Internet auction markets in China, Japan and Taiwan.

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