eBay gets Korea's largest auction site

Korea is the sixth largest Internet market in the world with more than 16 million persons that works out to about one third of the nation's population. In April 1998, Internet Auction introduced person-to-person trading and today it has expanded to the largest auction-style Web site in Korea.

The share acquisition is part of eBay's global plan to establish its presence in countries that represent the majority of the world's e-commerce revenue. eBay is currently in seven markets, including the United Kingdom, Germany, Austria, France, Canada, Australia and Japan. With the majority ownership of Internet Auction, eBay will be established in overseas markets that together represent nearly two thirds of the world's e-commerce revenue. Based on GMS, eBay is currently the number one trading site in the U.K., Germany, Canada and Australia.

The transaction will involve the purchase of slightly more than 50 percent of the outstanding shares of Internet Auction from three of its major shareholders: Sung Moon Kwon, The Will-bes & Co. Ltd., and KTB Network Co. All three shareholders are selling almost all of their interests in the company in the transaction.

The terms of the transaction call for the purchase of shares at a fixed price of 24,000 won. Based on an exchange rate of approximately 1,250 won to the dollar, eBay anticipates the expenditure of approximately $120 million in cash. The transaction is currently expected to close in the first quarter of 2001, pending receipt of shareholder, board of director, governmental, and regulatory approvals. Internet Auction is currently expecting 2001 sales of 68 billion won as reported per Korean Generally Accepted Accounting Principals (GAAP). Excluding non-cash charges and certain one-time costs, Internet Auction is expected to approach operational break-even cumulatively for the whole year.

The share acquisition is expected to increase eBay's 2001 consolidated revenue by approximately $20 million. On a pro-forma basis, the net income adjusted for non-cash items, such as stock compensation and one-time charges, is expected to lower eBay's 2001 full year net income per share by about one cent. On an as-reported basis eBay's 2001 full year net income per share is expected to be negatively impacted by about two cents. This is largely due to forgone interest income associated with the cash purchase. All of these estimates exclude any amortization of goodwill.