AMZN Amazon.com Inc

By Nicolas Parasie 

DUBAI-- Amazon.com Inc. said Tuesday it is acquiring Dubai-based Souq.com, placing one of its biggest global bets in recent years on the small but rapidly expanding Middle Eastern online shopping market.

Amazon didn't give a value but a banker familiar with the deal said it was worth around $700 million. The acquisition is one of the biggest in recent years for the global giant, which has spent heavily on expanding its footprint around the world but doesn't often splash out taking over whole companies as large as Souq.com.

"We're looking forward to both learning from and supporting them with Amazon technology and global resources," said Russ Grandinetti, Amazon's senior vice president for international consumer.

Souq.com, founded in 2005 by Syrian-born entrepreneur Ronaldo Mouchawar, has grown into one of the region's biggest e-commerce businesses--offering over 8.4 million products across categories such as consumer electronics, fashion and household goods--with around 6,000 employees and local operations in Saudi Arabia, the United Arab Emirates and Egypt.

Amazon beat Dubai's shopping-center heavyweight, Emaar Malls, which made a last-ditch $800 million offer to acquire Souq.com. Amazon's acquisition of video technology company Twitch Interactive Inc. for about $842 million, after adjustments, in 2014 was its last publicly announced deal of a larger size.

"We are guided by many of the same principles as Amazon, and this acquisition is a critical next step in growing our e-commerce presence on behalf of customers across the region," Mr. Mouchawar said. "We'll be able to vastly expand our delivery capabilities and customer selection much faster."

The acquisition is expected to close this year.

Amazon's takeover of Souq sets up the U.S. retail giant for a fierce battle with regional real-estate billionaire Mohamed Alabbar. His $1 billion e-commerce platform is expected to start within weeks, according to a person familiar with the company's plans. The new venture called Noon will offer 20 million products and is backed by Saudi Arabia's sovereign-wealth fund, the Public Investment Fund.

Emaar Malls, which made the rival bid for Souq.com, is the retail unit of real-estate giant Emaar Properties, whose chairman is Mr. Alabbar.

Both Souq, which means market in Arabic, and Noon are eager to profit from population growth in the Middle East, high levels of disposable income and smartphone penetration.

While still small compared with more mature markets, the Gulf region has the potential to become one of the world's fastest-growing e-commerce regions. Consultancy A.T. Kearney estimates that the Gulf's online shopping market could swell to $20 billion by 2020 from $5.3 billion in 2015.

The acquisition of Souq will give Amazon strength in the region thanks to Souq's existing customer base and infrastructure. Souq.com attracts over 45 million visits a month, according to the company.

Amazon already has a small presence in the Middle East. Its subsidiary Amazon Web Services, the company's cloud computing platform, opened offices in Dubai and Bahrain earlier this year.

Souq.com has often attracted interest from international investors. Last year, it raised $275 million from investors including New York-based Tiger Global Management, South Africa's Naspers and Standard Chartered's private equity arm.

Amazon's takeover of Souq was welcomed by the leadership of Dubai, the region's business and tourism hub which has been seeking to attract international companies.

Mr. Mouchawar's "story is a beautiful one," said Mohammed Al Gergawi, the U.A.E. minister of cabinet affairs. "You want a story like his, a Syrian who is doing a company worth hundreds of millions of dollars."

Souq originally planned a public listing or a partial stake sale in the company but the transaction evolved into a full sale, said bankers familiar with the deal. The sale process was delayed due to strong disagreements on price and amid interest from other regional companies keen on expanding in e-commerce.

The sale to Amazon represents a rare successful exit for a Middle Eastern startup. Yahoo in 2009 acquired internet portal Maktoob. In 2015, German e-commerce group Rocket Internet acquired Kuwaiti food-delivery business Talabat for about $170 million.

Sam Schechner contributed to this article.

Write to Nicolas Parasie at nicolas.parasie@wsj.com

(END) Dow Jones Newswires

March 28, 2017 08:41 ET (12:41 GMT)

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