Dubai-based Emaar Malls, which operates the ritzy shopping centers of the Middle East, has offered $800 million for Souq.com, a regional online retailer. This has almost sparked a potential bidding war between Emaar and Amazon.com.
The Souq.com shareholders have not yet accepted the bid put forward by Emaar Malls, as confirmed by the Dubai Stock Exchange-listed firm on Monday through a stock exchange announcement.
As reported by Bloomberg, Amazon had agreed the previous week to purchase Souq.com in principle. The local online retailer was established 12 years back by Ronaldo Mouchawar, an entrepreneur born in Syria. No comments have yet been received from Souq.com or Amazon regarding this issue.
However, as confirmed by a source that is related to this matter, Amazon’s bid at $580 million is lower than that of Emaar Malls. Quoting a couple of sources linked to this affair, the Financial Times states that Amazon is likely to pay an amount ranging from $650 to $750 million.
The source also confirmed that at this phase, in case Souq.com accepts the offer made by Emaar Malls, the exclusivity agreement that it has with Amazon will require breaking.
The source further continued that in the bid, Emaar Malls has agreed to pay $500 million upfront and also promised the Souq.com shareholders a 15 percent internal rate of return.
Research head at NBAD Securities Sanyalaksna Manibhandu said that if Emaar is successful in this bid, it will obtain a stronger foothold in consumer and retail behavior.
This offer does not constitute the only online move made by Mohamed Alabbar, a Dubai billionaire and chairman of Emaar Properties. Emaar Properties is the Dubai government-associated developer of the tallest building across the globe. Emaar Malls happens to be Emaar Properties’ retail unit.
Alabbar raised $1 billion in the year 2016 from local investors such as Public Investment Fund of Saudi Arabia to establish Noon, his e-commerce firm in the Middle East.
Before announcing Noon, Alabbar met Jeff Bezos, founder of Amazon, which resulted in speculations that the two parties would be working out some partnership in the area.
Noon was originally supposed to open for business in January, starting off with 20 million products. However, it could not live up to its launch date in January, and no comments regarding this delay have been received from the company till date.
The source confirmed that the current bid placed by Emaar Malls does not involve Noon in any way. The objective of the proposal is to balance the brick-and-mortar sales of the retail unit through the introduction of “click and collect,” as well as other services. In the Arab region, shoppers give more preference to in-store purchases, although a significant percentage of the population is young and tech-savvy.
Emaar Malls operates Dubai Mall, which is one of the biggest shopping centers in the Middle East and constitutes 50 percent of the luxury goods spending of UAE. According to Rabia Yasmeen, research analyst at Euromonitor, the retail division of Emaar would pave the road to online retail and help traditional brick and mortar retailers by reinforcing online retail.
Other investments have also been made by Alabbar in e-commerce and new technology, which include a stake purchase the previous year in Aramex, a regional logistics firm, and also a 4 percent stake in Italian-based online retailer Yoox Net-a-Porter, worth 100 million Euros.
Alabbar has announced his plans to make use of Kuwait Food Co (Americana) and Aramex for delivery of Noon’s products. He also expressed his desire to develop a phone messaging service in the Middle East that would function like Whatsapp.
Naspers Ltd. of South Africa, which also holds a stake in Souq.com equivalent to 36.4 percent, was unwilling to comment.
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