Tech groups beware. The UK’s Competition and Markets Authority has a blunt message concerning Adevinta’s $9.2bn agreed purchase of eBay’s classified ads businesses. The pioneering US retail auctions business would in return get a 33 per cent voting stake in the modish European group along with $2.5bn in cash. The regulator worries eBay might then influence Adevinta’s decision-making — presumably to discourage head-on competition.
Worldwide, regulators are experiencing seller’s remorse for approving deals that allowed tech giants to neutralise competitive threats. Facebook’s $1bn acquisition of Instagram in 2012 is the key example. The CMA’s intervention shows crossholdings are in their sights as well as full exchanges of control.
Adevinta is the result of a prescient decision by Schibsted to develop an online classified ads business in 2000. The Norwegian media group partially demerged its fast-growing offshoot in 2019. Last year Adevinta agreed to buy classified businesses that US activist Elliott had been pressuring eBay to sell. Adevinta expects the transaction will make it the largest classified specialist in the world.
Items bought at competitive auctions are rarely cheap and eBay classifieds is a chunky purchase. Raising the cash payment will pop Adevinta’s net debt to ebitda to 4.8 times, according to Berenberg’s Sarah Simon. Adevinta, which is based in Barcelona and listed in Oslo, needs to pay the balance in shares equivalent to a 44 per cent economic interest.
The CMA has limited scope to play the deal breaker. The combination of two UK second-hand goods websites — Gumtree and Shpock — is worth no more than 5 per cent of the takeover value. Adevinta and eBay could easily cancel that portion of the deal to get the UK watchdog off their back.
Minority shareholders in Adevinta may be rather more uneasy at the broader antitrust issue highlighted by the CMA. Competition in Europe is already tough. Facebook Marketplace is making inroads. Any pressure to stay off eBay’s patch would make life even tougher for Adevinta. The price paid by Adevinta — equivalent to 26 times trailing ebitda after cost cuts — would then look even steeper.
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