Emaar offers Souq $800m to keep Amazon out of MENA
Emaar Malls has bid up to US $800 million to take over e-commerce giant Souq.com, sources familiar to the offer have have confirmed days after Amazon made similar offer.
Just days after reports emerged that an Amazon-Souq.com tied-up was back on the table, Emaar Malls has bid up to $800 million to take over the MENA region’s largest e-commerce giant Souq.com, sources familiar to the offer have confirmed to Arabian Business.
Last week Amazon agreed in principle to a 100 percent takeover of Souq.com, in a deal believed be worth around $580m. The Emaar offer for $800 million is thought to have included a $500 million convertible deposit.
However, it is understood that Souq has an “exclusivity” clause as part of its negotiations with Amazon – meaning it would not be able to accept a counter offer while still in sales talks.
Sources suggest the Amazon deal is being driven by New York based Tiger Global Management which has a substantial stake in Souq.
However, other small shareholders in Souq are yet to commit to a sale that could see Souq undervalued by almost $220 million, in comparison to the offer from Emaar Malls.
Souq’s smaller shareholder include South Africa’s Naspers Ltd, Standard Chartered Private Equity, IFC (a member of the World Bank Group) and Baillie Gifford.
Souq.com raised $75 million from Cape Town-based Naspers in March 2014, in a deal it said at the time was the largest for an Internet-based business in the region. But it is not clear whether Naspers is now backing the Amazon deal.
The Emaar Malls offer to take over Souq is not unexpected. Emaar chairman Mohamed Alabbar had widely been seen as a contender to take over Souq, but through his own US $1 billion ecommerce portal Noon, which is due to go live within weeks.
A source told Arabian Business: “A deal with Emaar Malls makes a lot more sense both strategically and financially. You have the owner of the biggest malls teaming up with a huge ecommerce platform. That would really drive consumer growth. And of course the bid is for a lot more than Amazon are offering.
"It isn’t clear whether every Souq shareholder is signed up to the Amazon offer, and they could still prevent the deal from going through. Ultimately, any shareholder selling out wants to get the maximum return. That isn’t coming from Amazon anymore, it is only coming from Emaar.”
Going with a deal from Emaar Malls carries risk for the long-term viability of Souq.com though. A merger of Souq.com and Amazon would have given Amazon unparalleled reach in one of the fastest growing e-commerce markets in the world.
Souq.com has distribution centres across the region and an in-house last mile fulfilment arm reaching 22 MENA markets.
Noon.com would have found it difficult to compete with that kind of local foothold from Amazon, and given reports that Aramex is intended to be the last mile fulfilment provider for Noon.com, it is unclear what use Emaar Malls can make of Souq, except to ensure that any local competition for Noon.com is neutered.