eBay Inc (EBAY) and Adevinta ASA have now entered into a definitive agreement for eBay to transfer its Classifieds business to Adevinta for $9.2 billion, based on the closing trading price of Adevinta shares on the Oslo Stock Exchange on July 17, 2020.
As part of the transaction, eBay will receive $2.5 billion in cash and 540 million Adevinta shares giving it a 44% equity stake based on the number of Adevinta’s outstanding shares, as of the end of the second quarter, and a ~33.3% voting stake.
“We are pleased we reached an agreement with Adevinta that brings together two great companies,” said Jamie Iannone, CEO, 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.”
Adevinta is a global online classifieds specialist, currently operating in 15 countries, with a portfolio that spans 35 digital products and websites. eBay’s Classifieds platforms include a collection of 12 brands in 13 countries around the world. Together the businesses will have solid market positions in 20 countries globally, and eBay will become the largest Adevinta shareholder. Additionally, the scale provided by the partnership is expected to create estimated annual synergies of $150 – 185 million within the next three years.
“This deal is a testament to the growth and potential of the eBay Classifieds business,” said Alessandro Coppo, SVP and GM, eBay Classifieds Group. “We are excited for our local classifieds brands to join Adevinta and shape a global leader in an industry full of potential.”
The sale is subject to regulatory approvals, customary closing conditions, including approval by holders of at least two-thirds of the votes cast as well as of the share capital of Adevinta. The transaction is expected to close by the first quarter of 2021.
Adevinta is majority owned by Schibsted ASA, which has agreed to vote in favor of the transaction. Related to the transaction, Schibsted has entered into an agreement with Adevinta to acquire eBay Classifieds’ Danish entity once the transaction between eBay and Adevinta closes. Blommenholm Industrier AS, which holds approximately 6.3% of Adevinta’s ordinary shares, has also agreed to vote in favor of the transaction.
Following the closing of the transaction, each of eBay and Schibsted will be entitled to designate two directors to the Adevinta board of directors so long as it holds at least 25% of the Adevinta ordinary shares, and one director so long as it holds at least 10% of the Adevinta ordinary shares.
eBay has been seeking to sell the classifieds unit since around February, in response to activist investors that want it to focus on its main online marketplace. The unit is one of its last remaining non-core businesses after the company sold its StubHub ticketing division last year.
Five-star analyst Scott Devitt at Stifel Nicolaus last week raised the price target on the stock to $66 (13% upside potential) from $52, to reflect a higher valuation of the classifieds business in his sum-of-the parts valuation. “eBay continues to benefit from favorable trends in e-commerce which we believe may have more legs than currently reflected in estimates,” the analyst added.
The rest of the Wall Street community has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus shows 10 Buys versus 13 Holds and 1 Sell. Meanwhile, with shares up 62% year-to-date, the $56 average price target now implies 4% downside potential over the next 12 months. (See EBAY stock analysis on TipRanks).
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