Amazon (NASDAQ:AMZN) has made a deal to acquire Souq.com, the largest online marketplace site in the Middle East. Amazon will buy 100 percent of the Middle East online retailer, executives from both firms said. The value and terms of the deal were not disclosed, but is believed to be worth $650-$700 million. The acquisition was announced on Tuesday.
Launched 12 years ago, Souq.com currently offers more than 8.4 million products in 31 categories. The Dubai-based company currently attracts over 45 million visits per month. The company also has local operations in Egypt and Saudi Arabia. The online retail giant will absorb Souq.com’s existing operations.
Amazon beat out a last-minute bid from state-backed firm Emaar Malls, which is owned by Dubai billionaire Mohamed Alabbar. Emaar Malls, which operates the luxury Dubai Mall, had offered $800 million for the company. That was $200,000 less than the reported valuation at its last funding round. According to a source that requested to remain unnamed, Souq.com would have broken an exclusivity agreement with Amazon if it accepted Emaar’s bid at this stage.
Souq.com raised more than $275 million in a round of financing last year, but has not yet gone public. Souq.com had a $1 billion valuation when it sought funding last year. Souq.com co-founder and CEO Ronaldo Mouchawar said of the deal, “This is a milestone for the online shopping space in the region.” Adviser Goldman Sachs called the Amazon deal “the biggest-ever technology M&A transaction in the Arab world.”
The deal is one of Amazon’s largest in years and is Amazon’s first foray into the Middle East. The Amazon deal was welcomed by the Dubai government. Dubai’s leadership has increased its investment in technology and retail in recent years. Amazon has long sought to expand its influence in the emerging e-commerce markets of the Arab world.
Despite its young, tech-savvy population, shoppers in the Middle East still prefer to shop in stores. However, sales figures show that consumers are increasingly moving from luxury malls to online shopping. Online sales currently account for about two percent of retail sales in the Middle East, but is expected to grow quickly in the near future.
After the deal has been finalized, Middle East consumers will be able to buy products available on Amazon.com through Souq.com, and Middle East merchants will have access to Amazon’s network. Mouchawar said, “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.” Souq.com has even called itself ‘the Amazon of the Middle East’.