Amazon to Buy Middle East E-Commerce Site Souq.com
March 28 2017 - 8:56AM
Dow Jones News
By Nicolas Parasie
DUBAI-- Amazon.com Inc. said Tuesday it is acquiring Dubai-based
Souq.com, placing one of its biggest global bets in recent years on
the small but rapidly expanding Middle Eastern online shopping
market.
Amazon didn't give a value but a banker familiar with the deal
said it was worth around $700 million. The acquisition is one of
the biggest in recent years for the global giant, which has spent
heavily on expanding its footprint around the world but doesn't
often splash out taking over whole companies as large as
Souq.com.
"We're looking forward to both learning from and supporting them
with Amazon technology and global resources," said Russ
Grandinetti, Amazon's senior vice president for international
consumer.
Souq.com, founded in 2005 by Syrian-born entrepreneur Ronaldo
Mouchawar, has grown into one of the region's biggest e-commerce
businesses--offering over 8.4 million products across categories
such as consumer electronics, fashion and household goods--with
around 6,000 employees and local operations in Saudi Arabia, the
United Arab Emirates and Egypt.
Amazon beat Dubai's shopping-center heavyweight, Emaar Malls,
which made a last-ditch $800 million offer to acquire Souq.com.
Amazon's acquisition of video technology company Twitch Interactive
Inc. for about $842 million, after adjustments, in 2014 was its
last publicly announced deal of a larger size.
"We are guided by many of the same principles as Amazon, and
this acquisition is a critical next step in growing our e-commerce
presence on behalf of customers across the region," Mr. Mouchawar
said. "We'll be able to vastly expand our delivery capabilities and
customer selection much faster."
The acquisition is expected to close this year.
Amazon's takeover of Souq sets up the U.S. retail giant for a
fierce battle with regional real-estate billionaire Mohamed
Alabbar. His $1 billion e-commerce platform is expected to start
within weeks, according to a person familiar with the company's
plans. The new venture called Noon will offer 20 million products
and is backed by Saudi Arabia's sovereign-wealth fund, the Public
Investment Fund.
Emaar Malls, which made the rival bid for Souq.com, is the
retail unit of real-estate giant Emaar Properties, whose chairman
is Mr. Alabbar.
Both Souq, which means market in Arabic, and Noon are eager to
profit from population growth in the Middle East, high levels of
disposable income and smartphone penetration.
While still small compared with more mature markets, the Gulf
region has the potential to become one of the world's
fastest-growing e-commerce regions. Consultancy A.T. Kearney
estimates that the Gulf's online shopping market could swell to $20
billion by 2020 from $5.3 billion in 2015.
The acquisition of Souq will give Amazon strength in the region
thanks to Souq's existing customer base and infrastructure.
Souq.com attracts over 45 million visits a month, according to the
company.
Amazon already has a small presence in the Middle East. Its
subsidiary Amazon Web Services, the company's cloud computing
platform, opened offices in Dubai and Bahrain earlier this
year.
Souq.com has often attracted interest from international
investors. Last year, it raised $275 million from investors
including New York-based Tiger Global Management, South Africa's
Naspers and Standard Chartered's private equity arm.
Amazon's takeover of Souq was welcomed by the leadership of
Dubai, the region's business and tourism hub which has been seeking
to attract international companies.
Mr. Mouchawar's "story is a beautiful one," said Mohammed Al
Gergawi, the U.A.E. minister of cabinet affairs. "You want a story
like his, a Syrian who is doing a company worth hundreds of
millions of dollars."
Souq originally planned a public listing or a partial stake sale
in the company but the transaction evolved into a full sale, said
bankers familiar with the deal. The sale process was delayed due to
strong disagreements on price and amid interest from other regional
companies keen on expanding in e-commerce.
The sale to Amazon represents a rare successful exit for a
Middle Eastern startup. Yahoo in 2009 acquired internet portal
Maktoob. In 2015, German e-commerce group Rocket Internet acquired
Kuwaiti food-delivery business Talabat for about $170 million.
Sam Schechner contributed to this article.
Write to Nicolas Parasie at nicolas.parasie@wsj.com
(END) Dow Jones Newswires
March 28, 2017 08:41 ET (12:41 GMT)
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