Value of the deal was not disclosed, but was in the region of $580 million, according to sources
Amazon.com has agreed to buy Middle East online retailer Souq.com, thwarting a last-minute bid by Dubai billionaire Mohamed Alabbar's Emaar Malls, first revealed by Arabian Business on Friday.
The value and terms of the agreement, which deal adviser Goldman Sachs called "the biggest-ever technology M&A transaction in the Arab world", were not disclosed.
But sources with knowledge of the matter said Amazon was paying less than Emaar's $800 million offer, making it lower than the $1 billion valuation at the time of a Souq.com funding round last year.
One of the sources said on Monday Souq.com would have had to break an exclusivity agreement with Amazon if it had accepted the Emaar Malls offer at this stage.
Reuters reported last week that Amazon had agreed in principle to buy Souq.com, which was co-founded 12 years ago by Syrian-born entrepreneur Ronaldo Mouchawar.
"By becoming part of the Amazon family, we'll be able to vastly expand our delivery capabilities and customer selection much faster, as well as continue Amazon's great track record of empowering sellers," Mouchawar said in a statement on Tuesday.
In a deal document seen by Reuters, Goldman said the acquisition would accelerate Amazon's entry into "attractive Middle East countries with significant growth potential given e-commerce only represents (roughly) 2 percent of retail sales".
The deal was endorsed by the Dubai government, which is increasingly focusing on technology, as the emirate expands its retail footprint in the region.
Dubai's Crown Prince Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum said it showed the city state's position "as a regional and global hub for the world’s biggest and leading organisations".
The acquisition is expected to close later this year, according to the joint statement on Tuesday.
For Alabbar, who made his name as chairman of Emaar Properties, the Dubai government-linked developer of the world’s tallest building, losing out on Souq.com is unlikely to crimp his ambitions to move into e-commerce.
He announced last year he planned to launch his own e-commerce firm Noon in partnership with Saudi Arabia's Public Investment Fund, a soverign wealth fund.
Emaar Malls, the retail unit of Emaar Properties, is the operator of the Dubai Mall, which accounts for around 50 percent of the emirate's luxury goods spending and is one of the Middle East's largest shopping centres. South Africa's Naspers Ltd, which has a 36.4 percent stake in Souq.com, has declined to comment on the Amazon deal. Tiger Global Management also has a stake in Souq.com.
The value of the deal was not disclosed, but was in the region of $580 million, according to sources.For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
I might well use Souq again, now that this good news is in.
This is a very interesting development on a lot of levels. The Emaar bid was a sign of weakness not strength and the confirmation of the Amazon deal makes that clear. It also makes clear that the powers that be would definitely like to see real retail competition in the market instead of pseudo monopolies.
The deal signals the beginning of the end for Noon and Emaar Malls Group as neither with will be able to compete with Amazon. This will result in a massive slow down in bricks and mortar retailing across Dubai which will absolutely damage the bottom line of EMG where retail rents will be forced down, hence the last gasp bid from them.
Strategically, very shrewd decision from Souq that will pay off handsomely for them and the consumer. Very smart on Dubai's behalf creating a far more international and diverse business platform and profile.
I used Souq several times, and found the delivery very slow, 4-7 days. My orders from Amazon US arrive sometimes faster at my home via Shop and Ship....
Now with Amazon coming in, I look forward to next day delivery; that is the least I expect when I order online.
Really well put. I often wonder how shops out here can actually survive with the prices they charge and the rent they must pay. Plus most are empty when you walk in.
The malls are all busy but it appears it's the F&B places making the real money. Prices for these places are reasonable however buying goods in store, clothing in particular, is a complete rip off and it's high time the retailers woke up to reality. VAT won't help when implemented.
I really miss Amazon back in the UK. Service was great and there was really good competition for pricing of items available from other retailers using the platform. I hope they adopt the same platform here (i.e. smaller retailers can advertise and have deliveries fulfilled by Amazon).
You might find it arriving by drone in the not too distant future.
Potentially, yes this could be disruptive. There are two things though:
-First I am not sure a new entrant will be allowed to shake the entrenched interests of the established players. Competition has traditionally been carefully "managed" in the UAE
-Second, what makes you think that Amazon will be able to deliver as effectively as they do in the US/Europe. It may work to some extent in certain areas, but the GCC is not as nicely arranged in terms of streets and numbers. From a previous involvement with an e-retailer I learnt that physical delivery of goods in this region is hard. This will not change from one day to the next.
Let see, if competition is allowed to shake the status quo this ill be a really positive move, but i am skeptical
I hope the old very poor customer service which has caused me to drop souq.com would not be carried over and amazon culture will rub off with the new company enough to convince me to use them again.