CMA pauses sale of StubHub to viagogo for investigation

The Competition and Markets Authority (CMA) kicked off an investigation into the proposed sale of StubHub to viagogo, owned by Pugnacious Endeavors. They opened for questions regarding the proposed sale in December and have now issued an enforcement order to pause the merger until such time as they give the go ahead.

The CMA have ordered both eBay/StubHub and PUG/viagogo to report fortnightly under threat of fines, prison and a 5% of turnover penalty to confirm the businesses are kept separate and going concerns in the interim. Not only are they banned from any integration or sharing trade secrets, but they must report on any changes of key personnel, any major contracts won or lost, no assets of either business to change hands (either between the two companies or disposal to third parties) and the businesses must stick to their pre-merger business plans as if there was never going to be a sale of StubHub to viagogo.

It’s basically a pretty routine warning to not to anything to combine the two businesses unless and until the CMA gives permission for the merger to go ahead. If the CMA determines that there will be a substantial lessening of competition within any market or markets in the United Kingdom from the sale of StubHub to viagogo then they could block the merger. This would naturally put a serious dent in eBay’s plans to appease activist shareholders who want to see assets sold and a heft chunk of cash roll into their pockets. However StubHub and viagogo are playing to cool and saying the CMA investigation is a routine expected step in the acquisition process and there’s nothing to worry about:

“The requirement to hold separate the two businesses of Viagogo and StubHub is an expected part of the merger process, and we fully acknowledge the importance of the CMA’s examination into the deal.”
– Viagogo

“As the CMA states in the order itself, we do not expect any impact to the planned close of the Stubhub and Viagogo transaction. We are on track as previously communicated to complete the sale by the end of the first quarter of 2020.”
– StubHub

Closing the sale of StubHub to viagogo by the end of the first quarter of 2020 might seem a little optimistic as we’re almost half way through the quarter already. The CMA have hardly gotten started and haven’t even set a date for their official ‘Launch of merger inquiry’ let alone a date to publish their ‘Deadline for phase 1 decision’.

What unrest a potential delay will stir up from eBay’s activist investors is hard to predict – they are already pushing for a fast sale for eBay Classifieds so it’s anyone’s guess whether they’ll patiently wait for the CMA to report back or if they will find other mischief to get up to in the mean time in an attempt to wring as much ‘shareholder value’ out of eBay as possible. Either way it’s a distraction for eBay and while an internal and external search goes on for a new CEO the board and interim CEO are left to fight off investors and figure out a tactic for the marketplace that isn’t simply squeezing more margin for the same amount of sales. It’s time to find some growth.