Amazon.com has agreed to buy Dubai-based online retailer Souq.com, whose shareholders include Naspers and Tiger Global Management, betting that e-commerce in the Middle East is poised to take off.
The US e-commerce giant beat out Emaar Malls, which runs the world’s biggest shopping centre and had bid US$800m for Souq.com. Amazon and Souq.com didn’t disclose deal terms and declined to comment.
Amazon has been stepping up its overseas expansion. Having largely ceded China to Alibaba Group, the Seattle company is waging a war of attrition with Flipkart Online Services in India, where it has pledged to spend $5bn in the next few years. The Middle East has lagged behind the rest of the world in e-commerce, but online shopping is picking up in such countries as Bahrain, Qatar and the United Arab Emirates, where most people own mobile phones.
“As growth in core markets mature, Amazon is looking for new avenues of growth,” Edward Yruma, MD of KeyBanc Capital Markets, said in an interview. “You have very entrepreneurial e-commerce start-ups that need help getting to the next degree of scale so this makes sense from a lot of perspectives.” In an earlier note, Yruma said acquiring is a bit of a departure for Amazon, which typically builds businesses from the ground up.
In Souq.com, Amazon is getting a well-established player with a claimed 23m online visits a month. The retailer, which employs over 3 000 people, sells more than 400 000 products, from televisions to perfumes — and calls itself the “Amazon of the Middle East”.
Founded in 2005 as part of Arab online services provider Maktoob, it was spun out following Yahoo’s $164m acquisition of Maktoob in 2009.
Souq.com was valued at $1bn in its last funding round, people with knowledge of the matter said at the time. The retailer secured $275m in February 2016 from investors including Standard Chartered Private Equity, International Finance Corp and Baillie Gifford. Souq.com’s investors also include hedge-fund firm Tiger Global Management and South African media company Naspers.
The deal is one of Amazon’s largest acquisitions in recent years. In 2014, it bought game streaming site Twitch for $970m. The US retail giant began weighing a bid for Souq.com late last year. Having walked away from a deal earlier in the year, Amazon restarted negotiations to buy the company for as much as $650m, people familiar with the situation said on 9 March.
“Amazon and Souq.com share the same DNA — we’re both driven by customers, invention and long-term thinking,” Amazon senior vice president Russ Grandinetti said in a statement.
The deal is expected to close this year. — (c) 2017 Bloomberg LP
