Amazon to acquire Souq.com, Middle East’s highest-valued Internet company
Souq.com was founded in 2005 by Syrian entrepreneur Ronaldo Mouchawar.
- From February 2017, a deal that jumped between $650 to $850 million bracket, is reportedly said to have finally fetched a $650 million price tag.
- Goldman Sachs acted as adviser for Souq.com and helped to arrange the deal.
- Amazon's largest deal was for live-streaming gaming network Twitch, which it acquired for $970 million in cash in 2014.
Buying Souq.com provides Amazon with high growth potential to expand in the Middle East through an existing strong customer base and the infrastructure to store and deliver products.
- More than 75% percent of all online shopping in the Middle East and North Africa is on Souq's ecommerce site.
- With online purchases accounting for only 1 to 2% of regional retail sales, there is a tremendous opportunity for growth.
Amazon was, however, not the only bidder for Souq.com.
Investors boosted their own stakes in a $275 million funding round in February last year valuing it around $1 billion (£802 million)
Kuwait, United Arab Emirates and Saudi Arabia are among the top seven countries worldwide in terms of smartphone penetration.
Souq has recently entered into books and grocery segment too and offers 8.4 million products on its site.
Amazon now seems to be diverting all its attention towards the Middle East and has delayed its expansion plans for Southeast Asia at the moment, which were expected to begin with Singapore.
In January 2017, Amazon and Flipkart Online Services reportedly gave up on a deal to buy Souq.com for $1 billion but again Amazon’s interest in Souq.com was reignited two weeks ago.
The Mystery of Noon.com
Amazon’s first competitor in the Middle East region would be newly announced Noon.com- the $1billion shopping platform backed by Emirati billionaire Mohamed Alabbar and the Saudi Public Investment Fund.
Noon is set to launch within weeks housing 20 million products. Mohamed Alabbar picked up a 16% stake in Aramex last year which also placed pressure on Amazon-Souq deal. Backed by Emaar Properties Chairman Mohamed Alabbar, Noon.com promises to grow online sales in the region from 2 per cent of the total market (US$3 billion), to 15 per cent (US$70 billion) within a decade.
There is also expected to be a huge focus on the fashion segment, with hundreds of exclusive fashion brands on offer.
Competition will most likely drive prices down, meaning more goods for the average consumer. The deal will provide an early leadership position in the Mid-East e-commerce market, and a team with plenty of local expertise. Thanks to a young and tech-savvy population in the Middle East, the technology sector, which includes eCommerce, is growing at fast pace.
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