Competition heats up in South Korea’s retail M&A

eBay Korea’s acquisition might come out cheaper due to ‘winner’s curse’.

The fierce competition amongst South Korea’s retail firms over the acquisition of eBay Korea and food delivery app Yogiyo is sweeping through the merger and acquisition (M&A) market in the industry, Korea Bizwire has reported.

eBay’s acquisition has attracted Lotte Shopping, E-Mart from Shinsegae Group, SK Telecom and MBK Partners. Whilst some sources argued that the company could cost as much as $4.4b (KRW5t), the industry believes that it will come cheaper since bidding higher prices in a volatile retail market could end up in a ‘winner’s curse’.

As the bidding is set to begin around May or June, some sources argue that fierce competition and different views on pricing may lead to delays. “As for eBay Korea, the acquisition price in the trillions is just the beginning–it will need a massive, follow-up investment to generate synergy,” a retail source said.

Meanwhile, in the competition over acquiring Yogiyo, its call for bidders held on May 4 reportedly attracted major retailers and private equity funds.

As online mall SSG.COM has been shortlisted as one of the main bidders, what happens with eBay Korea is expected to affect Yogiyo. Its price was initially expected to hit $1.78b (KRW2t), but experts believe that the price will fall below $887.66m (KRW1t) during negotiations.

If Germany’s Delivery Hero fails to resolve different views on the company’s value, its Korean subsidiary Yogiyo’s sale may be delayed.