In February 2020, activist investor Starboard Value LP stepped up pressure on eBay to sell its classifieds unit. One year later, the sale of eBay Classifieds Group to Adevinta hit a snag due to regulators in the UK.
eBay announced in July it had entered into a definitive agreement to transfer its Classifieds business to Adevinta for a total consideration valued at approximately $9.2 billion, stating that the combined group would have solid market positions across 20 markets, covering 1 billion people with 3 billion monthly visits.
But on Monday, UK’s regulator, the Competition and Markets Authority (CMA), issued a statement announcing it found that Adevinta’s anticipated purchase of the classifieds unit from eBay “could lead to higher prices and less choice for consumers.”
The government regulator was troubled that eBay would acquire a 33.3% voting stake in Adevinta and positions on the Adevinta board. “This means that eBay will be able to participate in the management of Adevinta and could enable it to influence the business strategy for both Gumtree and Shpock.”
That would leave Facebook Marketplace as the only “significant competitor” to Shpock, Gumtree and eBay’s marketplace, it said.
“There is a realistic chance that without this deal Gumtree and Shpock would have been direct competitors to eBay, which is by far the biggest player in this market,” according to the CMA.
eBay reacted, issuing the following statement on Monday:
eBay Inc. (NASDAQ: EBAY) can confirm that the UK Competition and Markets Authority (CMA) has announced it has concerns that the proposed transaction between eBay Inc. and Adevinta ASA could reduce competition in the UK, following its Phase 1 review.
eBay and Adevinta now have the opportunity to propose potential remedies to avoid the transaction being referred to further investigation. While eBay and Adevinta do not agree with the CMA’s reasoning, they will work constructively with the CMA and are confident in finding a suitable resolution.
eBay and Adevinta will together propose legally binding solutions to resolve the CMA’s competition concerns before the deadline of February 23, 2021. The CMA will then have five working days to consider whether to accept the solutions, or to refer the deal to an in-depth investigation. A further update will be provided in early March following this decision.
In 2019, eBay Classified Group’s UK business accounted for less than 10% of its consolidated revenues and Adevinta’s UK business accounted for only 1% of its consolidated revenues.
eBay and Adevinta remain excited about the proposed transaction and look forward to closing.