The biggest classified advertising deal in history was officially confirmed this morning — a $9.2 billion blockbuster acquisition of EBay Classifieds Group by Adevinta that looks almost like a merger, rather than an acquisition.

The companies’ news releases are here and here.

The sale was announced almost 18 months after activist investor Elliott Management urged EBay to spin off both the EBay Classifieds Group and StubHub, its ticket marketplace. Both deals are now completed, although the Adevinta / EBay Classifieds deal is not expected to close until sometime next year.

The AIM Group wrote in March that Adevinta was the favorite to win the acquisition race. While there have been numerous twists and turns since then, our prediction proved accurate.

Some of the primary details:

  • The deal is worth $9.2 billion, making it the biggest deal in classified history, and just slightly larger  than the recent $8.7 billion privatization deal for China-based horizontal
  • According to an AIM Group analysis, using 2019 figures, the newly formed Adevinta / EBay Classifieds group will become the world’s No. 3 marketplace operator with $1.8 billion in revenue, behind Japan-based Recruit Holdings’ HR Tech division and the China-based horizontal giant
  • EBay will receive $2.5 billion in cash and 540 million Adevinta shares, amounting to a 44% ownership of the company and a 33.3% voting stake.
  • As a result of the transaction, Schibsted’s ownership in Adevinta will decrease from 59% to around 33%.
  • Schibsted will acquire EBay Classifieds’s Denmark assets for $330 million.
  • Both Adevinta and EBay cited up to $180 million of anticipated run-rate EBITDA synergies by the third year of operations.
  • Closing of the transaction is expected by Q1 2021, subject to Adevinta shareholder approval.

The transaction looks more like a merger than an acquisition. Adevinta is giving away a majority of non-voting shareholding rights in return for EBay’s classified division. This raises questions on how the corporate philosophies of the two companies will gel and whether their visions for international classifieds matches.

An additional question is how EBay plans to protect its fully owned b-to-c marketplace business by not going head to head with its merged classified division. Retaining a voice and a stake in the classified business may have been the most important reason EBay chose the Adevinta deal instead of the (reportedly richer, all-cash) deal with Prosus. But will an unwillingness to compete against EBay’s e-commerce division become a barrier to the growth of classifieds in crossover markets?

(The AIM Group will send clients an extensive analysis of the deal within the next day, and will publish a comprehensive package of material about it in next week’s Marketplace Report.)

Adevinta, EBay and Schibsted executives spoke today in regards to the deal.

“This transaction demonstrates we are swiftly executing on the strategy we outlined at our IPO last year, and it brings further diversification through exposure to new markets with attractive margins and strong growth potential,” Rolv Erik Ryssdal, CEO of Adevinta, said in the news release. “Our close cultural alignment with EBay Classifieds Group will allow us to pursue a shared vision. We look forward to a smooth integration, welcoming eBay Classifieds Group employees to the Adevinta family.”

“We are pleased we reached an agreement with Adevinta that brings together two great companies,” said Jamie Iannone, CEO of EBay Inc. “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.”

“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,” said Kristin Skogen Lund, CEO of Schibsted.

The background

EBay Classifieds Group operates / EBay-Kleinanzeigen in Germany; Marktplaats in the Netherlands; Gumtree in Australia, South Africa and the U.K., and a number of other classified businesses. The AIM Group has extensively covered the sale, starting in 2019 when activist investors first proposed a strategic review of the group’s operations

Adevinta, the international spinoff of Norway-based media conglomerate Schibsted, runs online marketplaces in 16 countries, with a significant presence in Europe and Latin America. The deal will double the size of Adevinta, which at Friday’s closing had a market capitalization of NOK 79 billion ($8.5 billion U.S.). EBay, meanwhile, will benefit from the growth of its minority share of the combined company, while retaining customers and avoiding competition between its classified and marketplace businesses. 

In securing the deal, Adevinta beat out two top contenders: Prosus, the Naspers subsidiary, and a group of private equity companies composed of Hellman & Friedman, the Blackstone Group and Permira. 

Late last week, Prosus was rumored to be in the lead with an all-cash offer. However, EBay’s board failed to make a decision at a meeting Friday, sources told Reuters. At a second, three-hour meeting on Saturday, the board made a U-turn and decided it was interested in keeping a stake in the business.

Greg Spencer, Lars Herlin and Jonathan Turpin of the AIM Group contributed to this report.

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