After over a year of denying any interest in the No. 1 French auction site iBazar, eBay (EBAY) has announced it will acquire the startup for around $100 million.
The sum is miniscule compared with iBazar's valuation last March, when the Italian bank Bipop-Carire pumped a second round of 20 million euros ($19.3 million) into the startup to value it at around 520 million euros ($503.5 million). But as hopes of an IPO crumbled for iBazar - which is a virtual cut-and-paste copy of eBay - the firm has been said to be looking for a buyer for the last six months. Both Yahoo (YHOO) and France Telecom (FTE)'s Wanadoo subsidiary were rumored to be in discussions with iBazar last autumn.
The giant U.S. auction site eBay had continually said it would not consider buying iBazar and that it planned to launch a French site on its own. However, those plans were sidelined when it realized that none other than iBazar CEO Marc Piquemal owned the domain name ebay.fr.
After failing to claw back the domain name in French courts, eBay was forced to launch locally at ebayfrance.com. By buying iBazar, eBay is also buying the name ebay.fr.
Under the terms of the agreement, eBay will issue approximately 2.25 million shares of common stock to acquire iBazar in a deal valued at around $100 million. The deal is subject to a "collar" of between $66 million (73 million euros) and $112 million (124 million euros), should eBay's stock price vary before the deal is closed.
EBay gains an immediate No. 1 position in France, where iBazar is by far the most popular auction site. The American company also gains a leading presence in Spain, Italy, Brazil, the Netherlands, Belgium and Portugal - countries in which iBazar has made large strides - as well as a No. 2 position in Sweden. In total, iBazar has 2.4 million registered users; in the fourth quarter of 2000, the group concluded 3.1 million individual auctions.
The fit is a good one for eBay, which is present in the U.K., Germany, Austria, Italy and France, as well as Canada, Australia, Japan and Korea. As yet there have been no announcements regarding potential layoffs in overlapping countries, though some consolidation is likely in France and Italy.
In Europe, the online auction market has undergone a wide-scale consolidation, with the largest player being QXL ricardo (QXLC). But that company's share price has taken a massive hit over the last nine months and its future looks shaky. EBay-iBazar will be a tough competitor to QXL ricardo, but both firms face the challenge of generating lasting revenues.
So far, iBazar is not profitable. During the fourth quarter, the value of goods traded on its sites totaled $95 million (105 million euros), but iBazar, unlike eBay, does not yet charge users to list goods on most of its sites, relying instead on advertising revenues. EBay's strategy of buying up local players is not new. Earlier this year, eBay took a majority stake in Korea-based Internet Auction Co. for $120 million in cash. However, as early as June 1999, eBay acquired Germany's Alando.de in a stock-swap of an undisclosed value in June 1999, less than six months after the German start-up launched. Alando's twenty-something founders became entrepreneurial heroes, and dozens of copycat eBays began popping up across Europe. IBazar, however, was slightly ahead of this wave; it got off the ground in October 1998.
