Shinsegae, Naver ink $221 mn share swap to rival Coupang in e-commerce

South Korea’s retail giant Shinsegae Group and top portal operator Naver Corp. have agreed to a 250 billion won ($221 million) share swap to strengthen their foothold in the increasingly competitive e-commerce market.

Under the deal clinched on Mar. 16, Naver will buy 150 billion won worth of stocks in Shinsegae's discount store chain operator E-Mart Inc. to become its third-largest shareholder with a 2.96% stake.

The web portal will also purchase 100 billion won in shares of fashion retailer Shinsegae International Inc. for a 6.85% stake, according to Naver’s regulatory filing.

In return, E-Mart and Shinsegae will purchase 250 billion won in Naver’s shares to hold a combined 0.4% stake.

Talks between the two sides about business cooperation and share swap made progress after Shinsegae Group Vice Chairman and de-facto leader Chung Yong-jin met with Naver’s co-founder and Global Investment Officer Lee Hae-jin in January.

“Through the share swap, we plan to establish a strong cooperation network that covers the entire retail business, including commerce and logistics,” Shinsegae said in a statement on Tuesday.

AIMS TO GAIN UPPER HAND VS COUPANG

The deal comes as Shinsegae and Naver are trying to gain the upper hand against rising e-commerce players such as Coupang Corp., which made a spectacular debut on the New York Stock Exchange last week.

Through the initial share sale, Coupang raised a whopping $4.6 billion – the largest amount by a foreign company listed on the New York bourse since China’s Alibaba in 2014.

Under the share-swap deal, E-Mart will be able to list its fresh groceries and other products on Naver’s online platform, which rose to the top spot in the country's e-commerce market last year. That may lead Naver users to visit E-Mart’s own online platform SSG.COM with a 2.5% market share.

For Naver, E-Mart's products will broaden its grocery lineup and expand its mobile payment services, Naver Pay, into E-Mart's offline stores, as well as the Naver Plus Membership. The subscription-based membership offers a discount on transactions made via Naver Pay.

E-Mart’s 2020 sales of 15.54 trillion won and SSG.COM’s revenue of 3.92 trillion won plus Naver’s online shopping sales will easily outpace Coupang’s 22 trillion won in e-commerce transaction value.

SHINSEGAE MAY LIST SSG.COM ON US MARKET

The deal also follows Naver's share swap agreement worth 600 billion won with logistics giant CJ Group in October last year to boost their competitive edge in the e-commerce and entertainment industries.

On Tuesday, Shinsegae Inc. also made a preliminary bid for eBay Korea Inc., Korea’s third-largest online shopping platform, to strengthen its e-commerce business.

Analysts said the strengthened ties between Shinsegae and Naver may not create the much-anticipated synergy.

SSG.COM handles about 79,000 online transactions a day on its site, much smaller than the 3.3 million transactions processed by Coupang.

Through the tie-up with Naver, Shinsegae wants to grow its business size to rival Coupang. The deal may also be aimed at growing the enterprise value of SSG.COM before making it public,” said an investment banking industry official.

Market watchers said Shinsegae may be tempted to list SSG.COM on the US market just like Coupang to raise funds from a broader base of global investors.

On the NYSE, Coupang finished up 4.1% at $50.45 on Monday, raising its total market capitalization to about 97.86 trillion won.

Write to Dong-Hui Park and Joo-Wan Kim at donghuip@hankyung.com
In-Soo Nam edited this article.