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EBay Sheds its Classified-Ads Business

Streamlining Operations

EBay (EBAY) has made a deal to sell its classified-ads business to Adevinta ASA, (ADE:NO), an Oslo, Norway-based company. Adevinta will pay eBay with $2.5 billion in cash and about 540 million shares of Adevinta stock.

EBay has been looking for a buyer for its classified-ads arm since February. Investors have been urging eBay to sell this part of its operations for some time so the company can concentrate on its core business.

EBay used to own PayPal (PYPL) and StubHub, but sold them due to similar investor concerns about the company focusing on its online auction operations. Last year, eBay’s classifieds business generated $1.1 billion in revenue in comparison to its auction business’ $7.6 billion.

Adevinta Expands its Presence

Ebay’s classified-ad unit, which is similar to Craigslist, is mainly active in Canada, Mexico, Africa, Australia, and parts of Europe. Adevinta currently runs digital marketplaces in 15 countries, so acquiring eBay’s operations will help it expand its reach—especially in Germany, one of the largest economies in Europe.

The new, combined company will have a significant presence in 20 countries, and it is estimated that its annual revenue will be $1.8 billion. Adevinta’s stock rose 36% on news of the acquisition.

EBay Works to Stay Competitive

Now that eBay has plans to shed its classified-ad operations, it is focusing on keeping its core business competitive. Ebay was a pioneer in the ecommerce sphere, but it has had difficulty keeping up with the likes of Amazon (AMZN).

Elliott Management Corp. and Starboard Value LP, activist investors in eBay, have been pushing the company to make big changes in order to remain an important ecommerce player, and to get its share prices up. In April, eBay appointed Jamie Iannone as its CEO, who was formerly the COO of Walmart’s (WAL) ecommerce division. Investors are hopeful that with new leadership and a streamlined structure, eBay will be able to stay an important part of the online shopping landscape.

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