eBay Sells Classifieds Business to Adevinta in $9.2bn Deal

eBay Sells Classifieds Business to Adevinta in $9.2bn Deal
July 22, 2020

 

The Classifieds business of eBay Inc (Nasdaq: EBAY) is reportedly being acquired by the Norway based company Adevinta in a cash and stock deal worth $9.20 billion.  Adevinta owns and operates online marketplaces across Latin America and Europe. The stock of eBay closed at $56.59, down $1.88 or 3.22% from the prior close.

As per the takeover agreement, eBay will be paid $2.5 billion in cash and 540 million Adevinta shares. Following the completion of the deal, eBay will have a 44% ownership of Adevinta, with a 33.3% voting power.

Commenting on the divestment, Jamie Iannone, CEO of eBay, said, “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.”

In February, The Wall Street Journal reported that the San Jose, California-based eBay is looking for a suitable buyer for its classifieds business, with private equity firms such as Naspers, Blackstone Group, TPG Capital, and German publisher Axel Springer SE named as prospective buyers.

Of late, Prosus NV, a Holland-headquartered company, owned by Naspers, surfaced as the main contender. However, last weekend, Bloomberg reported that the negotiations have failed because eBay was interested in maintaining a stake in the business after peddling it.

Adevinta was selected after a string of board meetings on Friday and Saturday in which eBay CEO Jamie Iannone persuaded the US firm’s directors that it should continue to have a stake in the classifieds division. The precise conditions of the $9 billion takeover agreement with Adevinta are yet to be disclosed, but the deal includes a considerable stock constituent that made its tender shine against opposing bidders.

The company’s classifieds division is primarily run from outside the US, including Europe, Australia, Canada, and Mexico. Specifically, eBay’s classifieds business includes Gumtree, Canada’s Kijiji, in addition to online automobile marketplaces in Germany, Denmark, Italy, and the UK, such as motors.co.uk. Ebay’s classified business serves more than 1,000 cities across the globe.

If Adevinta succeeds in acquiring the classifieds division of eBay, it can extend its global portfolio of P2P (peer-to-peer) e-commerce platforms.

Adevinta, which has a market cap of NKr79 billion ($8.50 billion), was hived off from Schibsted Last April. Schibsted currently owns a 60% stake in Adevinta, but the deal could result in dilution of the stake.

Two decades before, Schibsted ventured into classified business by launching the finn.no marketplace in Norway. The platform is used for selling almost everything, from houses to vinyl records.

For a while Schibsted has refrained from paying dividends as it is looking for suitable companies to acquire in fast-growing, high margin advertisement sectors.

eBay’s decision to sell off its classifieds business is believed to be an outcome of vigorous efforts put forth by activist shareholders Elliot Management and Starboard Value LP to make eBay divest its non-core business divisions. Last year, eBay sold StubHub to viagogo for over $4 billion and appointed a new CEO.

In the latest quarterly earnings report issued in April, eBay has stated that it was “explor[ing] potential value-creating alternatives for its Classifieds business, is holding active discussions with multiple parties and anticipates having an update by the middle of the year.”

During the first quarter of 2020, eBay’s core business (marketplace) generated revenues of $2.10 billion, while its classifieds business division reported revenues of $248 million. Last year, during the same period, the classifieds business reported revenues of $1.10 billion, while eBay’s marketplace posted revenues of $7.60 billion. The company is finding it difficult to compete with the likes of Amazon.

Before the outbreak of COVID-19, the classifieds division was valued between $8 billion and $12 billion. Last week, Adevinta reported a 15% y-o-y decline in Q2 earnings. However, the quarterly earnings surpassed analysts’ anticipations. The company also revealed that its business has been recovering in May and June, and that it expects the trend to continue in the second half of this year. In 1H20, operating earnings were €85 million on revenues of €344 million.

Kristin Skogen Lund, CEO of Schibsted, said, “Schibsted’s Board of Directors and management strongly supports the agreement between Adevinta and eBay, as we are confident that it will further strengthen the value creation potential for Schibsted and the rest of Adevinta’s shareholders. Schibsted intends to continue to contribute to the value creation for all Adevinta shareholders as a significant long-term anchor shareholder.” 

The news of divestment of classified business division is expected to keep the stock of eBay bullish in the short-term.

The historical price chart indicates that the stock has broken the resistance at 42. Additionally, the stock is trading above its 50-day moving average. The stochastic oscillator is also in the bullish zone. Therefore, we are anticipating the stock to rally in the days ahead.

eBay - technical analysis - 22nd July 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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