Online auctioneer eBay yesterday announced that it was acquiring a minority 37-per cent stake in Gmarket Inc, lifting shares of the South Korean online retailer by as much as 16 per cent. Some analysts saw the move as the first step toward eBay taking over Gmarket and removing it as a competitor in South Korea, where the two companies battle for market share.

eBay is in discussions with Interpark Corp, a South Korean web-based mall operator, and its chairman, Ki Hyung Lee, to buy out their interests. Interpark, the largest shareholder in Gmarket, directly held a 29.3-per cent stake of that company and Lee directly held 7.3 per cent as of December 2007, according to Gmarket's most recent annual report filed on 13 June. Yahoo is also a shareholder in the Korean entity with a 10 per cent stake.

eBay shares were down 18 cents, or less than 1 per cent, in afternoon trade at $25.86 after being down more than 1 per cent earlier in the trading day. Gmarket shares rose $3.20, or 14.4 per cent, to $25.38 on NASDAQ.

A purchase would mark eBay's latest move to capture the online auction market outside the US. The company says more than half of its revenue already comes from abroad eBay already runs Korean online auction site Internet Auction.

eBay's other international auction forays include its ownership of a stake in Buenos Aires, Argentina-based MercadoLibre Inc. and re-entrance to the Japanese market with Yahoo Japan Corp., Yahoo's joint venture with Softbank Corp. In India it had taken over bazee.com and renamed it as eBay.in.

The companies are seeking approval from the Korea Fair Trade Commission, eBay spokesman Jose Mallabo said. "There can be no assurance that the KFTC will approve the possible transaction, that an agreement will be reached or that a transaction will occur," he said in a statement.

Were the KFTC to approve the transaction, eBay would have a controlling share in Gmarket. eBay did not comment on how it would use its relationship with its competitor and Gmarket could not be immediately reached for comment.

Gmarket was founded in 1999 by Ki Hyung Lee as "AuctionWeb" & "ShoppingMall", part of a larger personal site. Originally, the site belonged to Online Market Group, a consulting firm.

Ku had tried to register the domain name "GreenMarket" but found it already taken, so he shortened it to his second choice, "gmarket.co.kr". Gmarket is headquartered in Seoul, South Korea. He has served as Gmarket's president and CEO since 2000. The site has 14.7 million users, representing more than a fifth of the Net-savvy country's population.

The company went public in 2006 and an offering of 9,119,565 American Depositary Shares was made on NASDAQ. The initial price was $15.25. In March this year, Interpark pulled out of a plan to sell its Gmarket stake due to what it called unstable financial markets in South Korea and abroad.

In June, the company announced it had earned $15.4 million on fees from the $927.7 million in goods sold over the site. In July, Gmarket posted quarterly profit that topped market estimates, helped by gains in its user base and gross merchandise value, the value of all items sold on its website.