EBay and deal managers Morgan Stanley and Goldman Sachs are planning to start a sale process for the U.S. ecommerce firm’s South Korean business this week, launching a deal that could fetch a valuation of 5 trillion won ($4.5 billion).

Teaser letters are being sent out to potential buyers, industry sources said. The first round of bidding is expected to take place before the end of March.

The San Jose, California-based company is reportedly seeking a 5 trillion won valuation for eBay Korea, which operates ecommerce platforms Gmarket and Auction. EBay Korea reported a gross merchandise value (GMV) of 19 trillion won in 2019, with a 13% share in the country’s online shopping market, behind only Coupang.

The valuation represents about 0.26 times the GMV, which is lower than for other local ecommerce firms that were recently sold at a multiple of 1.1 to 1.5 times GMV. The lower valuation is partly due to eBay Korea’s mediocre market position and limited growth potential amid intensifying competition, industry watchers said.

A weakness in grocery and fresh food delivery services, which have been growing rapidly since the Covid-19 pandemic struck, is another factor that will make the company less attractive to potential buyers.

However, eBay Korea is the only profitable firm in the domestic ecommerce market, having been in the black for 15 consecutive years. This, combined with its vast volume of customer data, could boost the company’s appeal.

Observers expect private equity firm KKR and brick-and-mortar retail conglomerates Lotte and Sinsaegae to show interest, though they would likely prefer to decide whether to remain in the race or withdraw after a preliminary due diligence.

KKR is the largest shareholder in ecommerce platform Tmon, which is preparing for an initial public offering on the Seoul stock exchange. The acquisition of eBay could boost its ecommerce portfolio.

Lotte and Sinsaegae are also stepping up efforts to expand their reach to online shoppers. Lotte recently launched its own ecommerce service Lotte On, and Sinsaegae, which operates grocery delivery service SSG.com, is in discussions with internet giant Naver Corp on linking up in the ecommerce market.

The South Korean business accounts for about 11% of eBay’s total revenue. eBay Korea’s revenue has continued to grow from 951.8 billion won in 2017 to 981.1 trillion won in 2018 and 1.06 trillion won in 2019.

Operating income was volatile in the same period, with 62.3 billion won in 2017, 48.5 billion won in 2018 and 61.5 billion won in 2019. (Reporting by Si-eun Park)

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