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Is Alibaba Group Holding Ltd (BABA)’s Shortest Path To eBay Inc (EBAY) Through China?

eBay Inc (NASDAQ:EBAY) officials have announced the plan to split their focus, separating e-commerce from online payments after a cohabitation of approximately 15 years. According to Forbes, the core eBay Inc (NASDAQ:EBAY) business will be valued somewhere between $30 and $40 billion, practically half of its current market capitalization. This raises the question of Alibaba Group Holding Ltd (NYSE:BABA) attempting a purchase on its American competitor. 1

It’s clear why a merger will work out, Alibaba Group Holding Ltd (NYSE:BABA)’s monetization strategy is similar to eBay Inc (NASDAQ:EBAY)’s in the context that both entities do not own the inventory that is traded on their platforms. Then, these two e-commerce titans have a payments system to facilitate transactions for their customers. But, one of the most cited incentives for these two to pursue a unification is the power which will be made available for the Chinese superstar, which’s savings from the Initial Public Offering amount to about half of the predicted price for PayPal’s parent.

However, there’s an alternative view for the evolution of events and it proposes Alibaba Group Holding Ltd (NYSE:BABA) to get even fatter in China as there’re plenty of potential online buyers and there’s practically no pressure from competition in the region. Moreover, even if eBay Inc (NASDAQ:EBAY)’s size in terms of both merchandise volume and market capitalization is a quarter of Alibaba Group Holding Ltd (NYSE:BABA)’s, it will be particularly difficult to unsettle it and expensive to acquire. Kelland Willis was cited as saying that Jack Ma’s business is already owning Auctiva and Vendio, which gives his company access to many buyers on eBay Inc (NASDAQ:EBAY)’s marketplace. So, it might be better to follow Sun Tzu’s notion of supreme art of war, that is “subdue the enemy without fighting”.

Possibly, Mr. Ma will slowly let roots in the West, but without major acquisitions as there is actually little need for a rush. It cannot be excluded that the Chinese businessman will pursue a merger with eBay Inc (NASDAQ:EBAY) only after a devaluation of the company, in case it succumbs to the pressure in the e-commerce business.

Disclosure: none

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