eBay (NASDAQ: EBAY) is said to be in advanced negotiations to merge its classified ads business, according to a report in The Wall Street Journal, as well as in other publications. The deal with Norwegian online marketplace Adevinta could value the eBay's unit for $9 billion or more.
The cash-and-stock agreement could be announced as early as Monday and would also give eBay a "significant" minority stake in the combined company, according to "people familiar with the matter." The merger could result in billions in tax savings that would be due if eBay simply sold the business.
eBay's classified ads unit operates primarily in international markets, including Canada, Europe, Africa, Australia, and Mexico, making it a good fit with Adevinta, which has a digital marketplace in 16 countries, with overlap in Europe, South America, and Mexico. The move would also significantly expand Adevinta's operations in Germany, where it currently has just a small market position.
The company has been working to auction off its classified ads business to the higher bidder. In addition to Adevinta, eBay has been entertaining offers from a group of private equity companies, including Blackstone Group (NYSE: BX), Permira, and Hellman & Friedman, as well as a separate proposal from Prosus (OTC: PROSY).
eBay has been under pressure from well-known activist hedge funds since early last year, as both Elliott Management and Starboard Value took stakes in the company and have been agitating for change, asking eBay to shed its non-core businesses and focus on its languishing e-commerce platform. Late last year, eBay sold StubHub to Swiss ticket seller Viagogo for about $4 billion.
The classifieds business brought in $248 million for eBay in the first quarter, representing more than 10% of the company's $2.37 billion in revenue.
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Danny Vena has no position in any of the stocks mentioned. The Motley Fool recommends eBay and recommends the following options: long January 2021 $18 calls on eBay and short January 2021 $37 calls on eBay. The Motley Fool has a disclosure policy.
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