eBay are flogging off the last of their crown jewels divesting eBay Classifieds for about $9.2 billion, but unlike previous sales they’re keeping a foot in the game with a stake in Adevinta who are acquiring the business unit.
eBay Classifieds – The deal
In the $9.2 billion cash and stock deal eBay will become the largest shareholder of Adevinta. eBay gets $2.5 billion in cash and 540 million shares of Adevinta, representing 44% ownership of the company and about a 33.3% voting stake.
Having been mooted to be looking for a cash buyer, this represents a change in direction. The deal was also expected to be about $8 billion so $9.2 billion is a nice surprise.
eBay to keep a large interest in eBay Classfieds business
By taking a large share holding, eBay are not only avoiding a massive tax bill which would have been incurred with a cash sale, but they’re also protecting their position from competition. The eBay marketplace isn’t a classified ads site so doesn’t compete directly with eBay Classifieds but there are enough other classifieds sites which could potentially pivot to become marketplaces in the future.
Classifieds sites are to be honest a bit old hat having been around just about as long as the Internet itself, but many newcomers are mobile app based and hardly compete with traditional online sites. These are perhaps the biggest threat as from a consumer perspective, apart from the payment and collection, it’s hard to tell the difference between some marketplaces and some classified ads sites.
“We are pleased we reached an agreement with Adevinta that brings together two great companies. eBay believes strongly in the power of community and connections between people, which has been essential to our Classifieds businesses globally. This sale creates short-term and long-term value for shareholders and customers, while allowing us to participate in the future potential of the Classifieds business.”
– Jamie Iannone, Chief Executive Officer, eBay Inc
Will this sate activist investors thirst for breaking up eBay Inc?
This sounds like good news for the unpicking of partnerships between eBay Motors, Gumtree and Motors.co.uk in the UK and a similar arrangement in Australia. The press blurb says that “Adevinta and eBay will continue to partner in key areas post-closing to ensure a seamless transition. Additionally, the scale provided by this partnership is expected to create estimated annual synergies of $150 – 185 million within the next three years“.
How activist investors who have been pushing eBay to sell off Stubhub and eBay Classifieds will view the deal is yet to be seen – eBay have done as requested and flogged of the advertising division but they’ve not converted it into pure cash but kept shares. Whether that is viewed as ‘creating’ enough ‘shareholder value’ is yet to be seen. At the time of writing, in pre-market trading shares are up from $58.47 to $59.15.
Flipping the Danish properties
Adevinta is majority owned by Schibsted ASA, which has agreed to vote in favour of the transaction. Schibsted has entered into an agreement with Adevinta to acquire eBay Classifieds’ Danish entity and therefore leading marketplaces in Denmark, DBA.dk and Bilbasen.dk, once the transaction between eBay and Adevinta closes.
“With the acquisition of eBay Classifieds Group, Adevinta becomes the largest online classifieds company globally, with a unique portfolio of leading marketplace brands. We believe the combination of the two companies, with their complementary businesses, creates one of the most exciting and compelling equity stories in the online classifieds sector. We have been impressed with eBay Classifieds Group’s achievements in recent years, leading across markets with nationally recognized brands including Mobile.de, Gumtree, Marktplaats, dba, Bilbasen, Kijiji, 2dehands, 2ememain, Vivanuncios, Automobile.it, Motors.co.uk, Autotrader (Australia), Carsguide (Australia), and eBay Kleinanzeigen, and innovating consistently across its product portfolio and advertising technology platform.”
– Rolv Erik Ryssdal, CEO, Adevinta
What does the future hold?
Pretty much the only remaining business owned by eBay Inc is now the eBay marketplace (plus a few odds and ends such as Gmarket in Korea). The task now facing Jamie Iannone is to put activist investors back in their box for good as, with PayPal, Stubhub and eBay Classifieds sold, the only thing left to sell is eBay itself. There has naturally been speculation that eBay could be sold off at some point in the future but with a market cap currently around $40 billion and a record high share price it’s going to require a buyer with a large chunk of change.
Going private would have advantages for eBay – the ability to regenerate the marketplace without having to answer to shareholders and turn in a half billion dollars a quarter in profits would be a godsend. However in the short term that’s unlikely so, with the eBay Investor call scheduled for the 28th of July, it’s time to wait for Jamie Iannone to set out his stall and present a plan for the future growth of eBay.