Subject: Your Amazon point balance has changed.

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Date: Thu, 23 Mar 2017 15:32:09 -0400

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Amazon continues its march across the globe, and one of its newest targets is the Middle East.  According to multiple reports that we have confirmed with our own sources, the e-commerce giant has acquired Souq, often described as the Amazon of the Arab world and the region’s biggest e-commerce player, for a price of $650 million, to spearhead its Middle East business.  “The ink is dry” on the deal already, one source close to the company tells us. 

Souq itself declined to comment for this story.  Its CEO Ronaldo Mouchawar did not answer our emails and phone calls.  Amazon declined to respond to our request for comment. 

“We’ll decline to comment on rumors and speculation, but thanks for reaching out,” said Ty Rogers, a spokesperson from Amazon. 

While it could be transformative for the region, the acquisition is not the huge exit that investors had hoped for Souq.  The company had been valued at $1 billion in its last round of funding a year ago, when it raised $275 million.  And at the end of last year, Souq was actually in talks to sell a 30 percent stake to Amazon in a deal that would have valued it also at $1 billion. 

After that initial sale fell apart, Souq — which also held acquisition talks with eBay and Saudi retail group Majid Al Futtaim last year — had spent 2017 to date thrashing out a deal that jumped between $500 million and $700 million.  Eventually, the two parties settled on $650 million, a number “that both can swallow,” a source revealed. 

Regardless of the lower price, it does look like investors will get their money back, and then some: in all Souq. com had raised $425 million, according to CrunchBase, with investors including Ballie Gifford, IFC Venture Capital Group, Jabbar Internet Group, MENA Venture Investments, Naspers, Standard Chartered Bank, and Tiger Global Management. 

The deal lets Amazon — which has never had business operations in the Middle East — hit the ground running with an already-large, established operation. 

Souq has been around since 2005, founded by Mouchawar after Yahoo acquired his Arab-language internet portal Maktoob, leaving the e-commerce business behind (that portal was shut down by Yahoo in 2014 as part of its huge international retreat). 

Today, it is the region’s largest e-commerce player in terms of active business: the company’s marketplace connects some 75,000 businesses with consumers to buy their goods, with the total number of products on offer currently at around two million across over 30 categories, such as electronics, fashion, household goods and (most recently) car accessories. 

But the marketplace is not all that Amazon is getting.  Souq’s business also includes an existing fulfilment operation (logistics and fulfilment being a key part of how Amazon has expanded elsewhere).  And it looks like the deal will also include Souq’s online payments gateway Payfort, which means that Amazon will be getting payments expertise and technology localised to the region. 

Owning Souq sets Amazon up to play a significant role in the region’s growing e-commerce market, which today accounts for around only two percent of all retail spend, according to a report from McKinsey.