EBay to buy Korean auction company
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SAN JOSE - EBay said it will pay about $120 million in cash to buy a controlling interest in Internet Auction Co., Korea's largest online-auction company, as part of its plans to expand across the globe.
The No. 1 Web-auction company said the purchase will give it 2.8 million users in Asia's second-largest online market. The acquisition is expected to shave 2 cents a share from eBay's 2001 profit because of interest income it will lose on funds used in the purchase.
EBay already operates in seven nations outside the U.S. and is targeting expansion in countries with larger Internet populations as part of plans to increase sales by 50 percent annually during the next five years. EBay said it has no plans to change Internet Auction's management and may use the 140-employee company to enter smaller markets in Asia.
Dominating Korean market
"It is an extremely well-managed company with a leading market share in its country," said Meg Whitman, EBay chief executive.
Internet Auction dominates the Korea market much like EBay does in the U.S., Whitman said. Among other Asian countries eBay may enter are Taiwan, Hong Kong and Singapore.
China is being considered on a long-term basis, Whitman said.
The acquisition is eBay's largest on a cash-only basis and ended more than a month of speculation about a transaction between the two companies.
EBay will obtain a little more than 6.25 million of Internet Auction's 12.5 million shares from the company's major shareholders, Sung Moon Kwon and two companies in which he holds shares - garment manufacturer Willbes & Co. and venture-capital firm KTBNetwork Co.
EBay will pay 24,000 won ($18.98) a share for Internet Auction, which rose 1,350 won to 23,600 in trading Friday on the Kosdaq market.
EBay expects to complete the acquisition by March after obtaining shareholder and other approvals. It will use existing cash.
The San Jose-based company had $877 million of cash and investments at the end of September.
Internet Auction is forecasting its business will operate on an about-break-even basis this year, excluding non-cash charges and other costs.
Plan to combine
EBay, which will control Internet Auction's 11-member board, said it will combine the Korean company's financial results with its own. The purchase will increase eBay's 2001 revenue by about $20 million, eBay said.
The company is expected to earn 38 cents a share in 2001, excluding stock compensation and other non-cash items. The purchase will reduce this year's earnings by 1 cent a share, EBay said.