eBay Strikes $2.2 Billion Deal, Offloads Remaining Adevinta Shares to Permira and Blackstone in Shift Away from Classifieds
In 2021, eBay had previously divested a portion of its holdings in the classified ads company, generating $2.25 billion from the sale.
eBay has announced the sale of its remaining shares in the online classified business Adevinta to private equity firms Permira and Blackstone for $2.2 billion in cash and a 20% equity stake. Adevinta initially acquired eBay's classified business in 2020, leaving eBay with $2.2 billion in cash and 540 million Adevinta shares. Although the deal is subject to regulatory approval, the e-commerce and auction giant anticipates its completion in the second quarter of 2024.
When Adevinta acquired eBay's classified business, it was predominantly owned by the Norwegian publisher Schibsted. Adevinta now has plans to transition to a private entity. To execute this, the company extended an offer to eBay for its remaining shares through a private Norwegian limited liability company, Aurelia Bidco Norway AS, specifically established for this transaction.
The offer places a valuation of approximately $4.3 billion on eBay's complete stake in Adevinta. This valuation represents a significant increase from the $2.8 billion figure reported in press accounts back in September, as highlighted by eBay. The prospect of a Blackstone-Permira bid, initially leaked in that same month, had driven Adevinta shares up by over 21%.
In 2021, eBay had previously divested a portion of its holdings in the classified ads company, generating $2.25 billion from the sale.
eBay is set to divest half of its remaining shares in the classified ads company for around $2.2 billion in cash upon completion. Concurrently, eBay will retain the other half but with a twist—it will secure a 20% equity stake in the newly privatized company. The proceeds from this transaction are earmarked for "general corporate purposes," with eBay emphasizing its commitment to returning 125% of its cumulative free cash flow to shareholders over the three-year period ending in 2024. This commitment will be fulfilled through a combination of share repurchases and dividends.
Following the completion of the transaction, Permira, Blackstone, and their co-investors will be granted the option to acquire an additional set of Adevinta shares from eBay. This move will further diminish eBay's ownership stake to around 9.99%. The specified purchase price for these shares will mirror the amount eBay receives for its Adevinta shares at the closing of the deal, potentially resulting in an extra sum of over $1 billion for eBay.
The deal marks another setback for eBay's broader aspirations in the e-commerce space. Over the years, the company has divested various segments of its operations, including classifieds, payments through the spin-off of PayPal, and ticketing with the sale of StubHub in 2019. Classifieds, in particular, seem like a relic from the earlier days of the internet, predating the dominance of e-commerce giants like Amazon and other sizable online marketplaces. At the time of selling its classifieds business to Adevinta, eBay highlighted that classifieds had yielded revenues of $248 million in its latest quarter, experiencing a 3% decline. In contrast, eBay's marketplace had generated $1.9 billion during the same period.
Today, classifieds face competition not only from e-commerce platforms but also from various other platforms facilitating the purchase of secondhand items. This includes online thrift stores like Poshmark, as well as platforms connecting buyers with local sellers, such as Facebook Marketplace and apps like OfferUp. Consequently, eBay has adjusted its strategy, moving away from auctions and classifieds to transform into an expansive marketplace for a diverse range of goods, encompassing collectibles like trading cards and sneakers. Additionally, the company has invested in enhancing its capability to authenticate apparel and fashion items, exemplified by its acquisition of Certilogo, an AI-powered authentication technology firm, earlier this year.
In its latest financial report, eBay disclosed revenues of $2.5 billion, reflecting a 5% increase on a foreign exchange-neutral basis, in line with predictions. The non-GAAP net income stood at $545 million, equivalent to $1.03 per diluted share, surpassing the projections of financial analysts.
This information was extracted from TechCrunch.
