4 Min Read
DUBAI/BERLIN (Reuters) - Emaar Malls will buy a 51 percent stake in e-commerce fashion website Namshi from Global Fashion Group, a firm backed by Rocket Internet, for $151 million (£116.5 million), a sign of growing demand for tech deals in the Middle East.
The acquisition comes two months after Amazon agreed to buy Souq.com, showing how the Gulf region is embracing e-commerce, a market which global consultancy A.T. Kearney predicts will grow to $20 billion by 2020.
"This is a sign of Emaar's ambition to enter the digital space," GFG's finance chief Nils Chrestin told journalists, adding the partnership should allow Namshi to add more fashion brands and potentially expand to more neighbouring countries.
Both Emaar and GFG said they had agreed to jointly develop the business until a possible listing or a full takeover.
The investment is also good news for e-commerce investor Rocket Internet, which has been under pressure since the valuation of GFG was slashed by two thirds last year during a fundraising round with Swedish investor Kinnevik.
Rocket's shares, which had risen on Tuesday in response to strong growth at its online food delivery firm Delivery Hero, were up another 4 percent by 1018 GMT, making them the biggest gainer on the German small-cap index.
Namshi, which operates in the United Arab Emirates, Saudi Arabia, Qatar, Kuwait, Oman and Bahrain, is GFG's smallest business but the only one that has turned profitable.
Its sales rose a currency-neutral 8.5 percent in the first quarter to 36.7 million euros (£31.6 million), while its gross profit was up slightly at 18.4 million euros.
Emaar will buy the stake in Namshi in an all-cash transaction, which is expected to close in three months.
Dubai billionaire Mohamed Alabbar, founder and chairman of Emaar Properties, the developer of the world's tallest tower the Burj Khalifa, has focused more on technology investments and e-commerce in the past year, buying a stake in regional logistics firm Aramex.
Emaar Malls, the retail arm of Emaar Properties, was unsuccessful in the deal process for Souq.com, after an eleventh hour bid, which the company said was worth $800 million.
The Namshi deal is expected to provide much-needed support for Alabbar's new technology vehicle Noon.com, a venture with Saudi Arabia's Public Investment Fund.
The venture has seen a shake-up in the past few weeks with the departure of Noon's chief executive and chief technology officer along with several staff. Alabbar said last week its venture was still on track to start operations before end-2017.
Amazon's acquisition of Souq.com was expected to trigger consolidation in the sector, Namshi's co-founder said in an interview with Reuters in March.
"Generally, Amazon comes into a market and very quickly is able to dominate," Hosam Arab said.
"General merchandise players should be especially worried if they cannot provide their customers with clearly differentiated value propositions. Pure players like Namshi for example will be challenged but potentially less so," he said in the interview.
Arab was not immediately available to comment further on Wednesday.
GFG, which runs four fashion ecommerce businesses in 24 emerging market countries including Namshi, reported first-quarter sales of 265.3 million euros, up 18 percent on a constant currency pro-forma basis.
Its adjusted loss before interest, taxation, depreciation and amortisation fell almost 30 percent to 33 million euros.
Additional reporting by Maria Sheahan. Editing by Jane Merriman