Kakao Corp is emerging as the frontrunner to acquire eBay Korea, the U.S. ecommerce company’s South Korean unit that operates online shopping platforms Gmarket and Auction.

The internet giant is considering options to fund its possible acquisition proposal for eBay Korea, industry sources said. Morgan Stanley and Goldman Sachs, which are managing the sale process, are expected to receive indicative offers from potential buyers on March 16.

eBay Korea is estimated to be worth about 4 trillion won ($3.5 billion). This is below the 5 trillion won valuation initially wanted by its U.S. parent company, with the target’s inferior market position and declining operating profits in recent years dragging down the price.

Kakao has a strong cash position with more than 2.68 trillion won of cash and cash equivalents on hand as the end of September 2020 on a consolidated basis. It also has treasury shares worth about 1.2 trillion won based on the closing price of its common stock on March 4.

However, Kakao may prefer to reduce the investment risk by teaming with a private equity (PE) firm rather than acquiring the target by itself, industry watchers said.

The company has built a partnership with several investment firms in previous deals involving its affiliates. Kakao Mobility raised 500 billion won from PE investors led by California-based TPG Capital when it was spun off from Kakao in 2017. The mobility unit raised another 220 billion won from Carlyle Group in January, which made the buyout firm the third largest shareholder behind Kakao and TPG Capital.

Kakao Bank, Kakao’s online bank, also raised 750 billion won from TPG Capital and 250 billion won from Anchor Equity Partners last year.

Another funding option that Kakao may consider is to issue exchangeable bonds, as it did in 2016 when it bought a controlling stake in Loen Entertainment, now renamed Kakao M, from Affinity Equity Partners for $1.6 billion.

At the time, Kakao sold $200 million worth of exchangeable bonds that can be converted into shares of Loen Entertainment as part of efforts to fund the acquisition. Later, as Loen Entertainment was merged into Kakao and ceased to exist, the underlying asset was changed to shares in Kakao. Investors, which were mostly institutions from Asia and Europe, earned significant returns after taking advantage of Kakao’s stock rally last spring.

Other potential buyers of eBay Korea include retail giants Shinsegae and Lotte and private equity groups MBK Partners, Affinity Equity Partners and KKR. (Reporting by Si-eun Park)