Online auctioneer eBay is to pay $150m in cash to expand its foothold in China's growing e-commerce market by taking full ownership of a leading Chinese web auctioneer.
EBay is betting on China's economic boom
EBay said it would buy up the remaining 67% of Chinese web auction site EachNet, which has been its Chinese partner since it spent $30m on one third of the firm in 2002.
EBay said its own earnings would take a slight hit in the second half of this year because of the deal.
But it pointed to the potential of China's e-commerce sector, saying nationwide revenues from online sales could be worth $16bn by 2005.
Analysts are also expecting the outbreak of Sars (Severe Acute Respiratory Syndrome) to give a fillip to online sales in China.
They hope that those who have discovered internet shopping during the outbreak keep up the habit.
"EachNet has built a great business and is in a fantastic position to take advantage of the long-term growth prospects of e-commerce in China," said eBay president and chief executive Meg Whitman.
EachNet was founded in 1999 by two Chinese Harvard graduates, Shao Yibo and Tan Haiyin.
They modelled their start-up on the success of eBay.
EBay's brief statement did not say if there would be any change in management following the buy-out.
It said the new relationship would help EachNet extend its success and "enhance the online trading experience of Chinese buyers and sellers".
So far, eBay has acted mainly as an adviser to the Chinese firm, EachNet chief financial officer Mark Fagan told BBC News Online in an interview in September 2002.
"We don't use their brand, we don't share listings, we haven't taken any software," he said.
He said the US firm had shared "a tremendous body of knowledge", especially on "how to manage the business at different stages of its growth".
E-commerce remains in its infancy in China, held back by a weak banking system; credit card transactions and even cheques cannot be honoured nationwide.
Fewer than 3% of China's web users have bought goods online, official data collector CNNIC estimated last year.
It expects China to have an online population of 86 million by the end of 2003.
EachNet is not yet profitable, Reuters news agency quoted an eBay spokesman as saying.
EBay said the deal would go through some time between July to September, and would knock two cents off its earnings per share in the third quarter of 2003, and one cent in the fourth quarter.