RealTime IT News

eBay Acquires Chinese Shopping Site EachNet

eBay has moved to take full ownership of Chinese e-commerce company EachNet for $150 million in cash.

EachNet, based in Delaware, caters to online Chinese shoppers with a wide variety of goods, similar to some of eBay's offerings. The purchase is expected to help eBay increase its position with fast-growing online auction markets in China.

According to the China Internet Network Information Center, there are more than 59 million online shoppers in China, making it the second largest market in the world, behind the U.S. But the study points to impressive growth in the Chinese online shopping market, saying it expects there to be 86 million involved by the end of this year. The partners cited market research stating the e-commerce in China could climb to $16 billion by 2005.

eBay's cash infusion in EachNet follows on its initial investment of $30 million in March 2002 for one-third of the company. With the $150 million investment, EBay has now acquired the entire company. It said the transaction would have nominal impact on revenue in the third and fourth quarters.

The company also said it expects the deal to close in the third quarter. While EachNet is based in Delaware, the company operates throughout China with a variety of partners. EachNet is said to have over two million registered users, more than 300,000 listings and close to 150 employees.

On Thursday, Deutsche Bank issued a note on eBay that said EachNet is expected to record an operating loss of $10 million in the third quarter and $5 million in the fourth quarter. The note also said "the deal makes strategic sense for eBay to own the dominant platform in the region" and that eBay is poised to capitalize on future growth in the Chinese online shopping market.

Jeetil Patel of Deutsche Bank also wrote that "the company tends to make an outright purchase at a time when the model in new geographies is sustainable and can be scaled up in future years with minimal risk. In fact, we would not be surprised to see the company further consolidate its investments given this move in China."

Shares of eBay have increased by nearly half in the past year, and its market capitalization hovers around $32 billion.

In a separate development on Wednesday, eBay's proposal to give its managers more stock options received an approval recommendation from Institutional Shareholder Services. The nod by the nation's leading proxy adviser is a reversal, which last year said that investors should vote down increases in the number of shares eBay grants as options to its top managers.

EachNet was founded by Bo Shao and Haiyin Tan in 1999. Its early investors included Whitney & Co., AsiaTech Ventures Limited, and Orchid Asia Holdings.