Emaar Malls missed out on a bid to buy Souq when Amazon picked up the Dubai-based online retailer for about $650 million in March. Now, the retailing giant of the Middle East is making another acquisition to step up its game in e-commerce. Today Rocket Internet the Berlin-based e-commerce incubator announced that it has sold 51 percent of Namshi, its Middle Eastern Amazon clone, to Emaar for $151 million.
The deal sets up an interesting competitive landscape in the region, pitting Emaar, the largest brick-and-mortar retailer in the Middle East operating properties like the Dubai Mall, against Amazon, which is now moving into grabbing more revenue and customers in the region via its acquisition of Souq.
Emaar Malls has long been looking to ramp up its presence on the web andsaid that it will use the new asset to expand its logistics and expand more brands to selling online.
This has also led its head, chairman Mohamed Alabbar, to make a number of other investments in recent months, such as taking a stake in logistics company Aramex; and buying a 49 percent stake in MEVP, a largeVC firm based out of the Middle East. A source tells us that he is also planning to invest some $2 billion in all across a range of startups in the region, although this has yet to be confirmed.
Perhaps one of Alabbarsbiggest bets has beenputting$1 billion into Noon, a new soup-to-nuts e-commerce site that is meant to rival to Souq.Noon has yet to launch, though, and its not clear if Namshi will replace, complement, or operate completely separately from it.
(Looking at Emaars and Alabbars track record, I would not be surprised if Noon turns out to be an umbrella for everything else, or at least based on some of the acquired assets, since building something new from scratch is costly and hard at the best of times.)
The acquisition of a majority stake in Namshi underlines our digital-driven strategy to leverage the growing e-commerce market in the Middle East and North Africa region, said Alabbar in a statement. Namshi offers a perfect fit for Emaar Malls in accelerating its focus on multi-channel retailing, and creating long-term value for its stakeholders.
Rocket Internet said that it would continue to hold the remaining 49 percent as part of its larger Global Fashion Group operation an entity it created back in 2014 to consolidate severalof its many emerging market brands: Dafiti in South America, LaModa in Russia, The Iconic in Australia/New Zealand, and Zalora in South East Asia.
At its loftiestpoint, the GFG was valued at over $3 billion, but in 2016 it saw a massive markdown on that to around $1 billion. Todays deal values Namshi at just over $300 million.
We are very excited to welcome Emaar Malls as our majority shareholder, saidHosam Arab, MD of Namshi. We are confident that this partnership will unlock further opportunities and help accelerate the development of Namshi for the benefit of our customers. We would like to congratulate and thank our team for their tireless efforts in making Namshi the Middle Easts premier fashion ecommerce destination and we look forward to continuing this journey together with Emaar Malls and GFG.
Namshisaid that itwas profitable in 2016 on revenues of 555 million UAE Dirham, equivalent to $151 million the same as the stake Emaar is taking today. But the bigger picture is that Rocket Internet has been bleeding cash. In its last quarterly report, in April, the company reported a loss of nearly $600 million.
Unsurprisingly, to shore up cash, cut out the underperforming parts of its business, and capitalise on what has been working or is appealing to strategic investors, Rocket Internet has been gradually divestingsome of its holdings in the GFG and other businesses across itsportfolio.
In February, the group agreed to sell a 49 percent stake in Zalora Philippines to the Ayala Group, a conglomeratein the region. Previous to that, Alibaba took a $1 billion investment in Lazada. There are other units in the GFGalso being sold off, as weve previously reported.