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Amazon Inks Deal to Acquire Souq.com: 2 ETFs in Focus
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After eyeing the Middle East market for quite some time, Amazon has finally made a move. It clinched a deal to buy Dubai-based online retailer, Souq.com. Executives from both companies confirmed that they agreed on the takeover, but did not shed light on the terms of the deal. The deal materialized despite the eleventh hour bid of $800 million by Mohamed Alabbar’s Dubai-based Emaar Malls.
Souq.com was founded in 2005. The online retailer stocks 8.5 million items on its website and generates approximately 50 million monthly visits.
Souq.com Co-Founder and Chief Executive Ronaldo Mouchawar expects to utilize the common values of the two companies to expand the business in the region, which according to him has still not been tapped, as online purchases comprise just 1-2% of overall sales.
According to the two companies, there is tremendous potential in the region and this alliance will help them to become a major player. Per Standard Chartered, e-commerce in the region is growing at 30% annually.
However, competition is expected to intensify in the region when Saudi sovereign wealth fund and Emaar backed Noon is launched with 20 million products and a 3.5 million square feet fulfillment center in Dubai. Amazon and Souq predict that the market has great potential and it can absorb new players.
The fund has AUM of $75.9 million and charges a fee of 35 basis points a year. Home Depot Inc (HD - Free Report) and Wal-Mart Stores Inc. (WMT - Free Report) hold the next two spots with an allocation of 7.92% and 5.87%, respectively. The fund bears significant concentration risk with more than 65% allotted to the top 10 holdings. It trades in an average volume of 27,400 shares. The fund returned 0.96% in the past one year and 3.14% in the year-to-date time frame. RTH currently has a Zacks ETF Rank #2 (Buy) with a Medium Risk outlook (read: Consumer ETFs & Stocks Not Hurt by Soft February Retail Sales).
This fund is one of the most popular in the space and has an 11% exposure to Amazon.
The fund has AUM of $2.3 billion and is one of the cheaper options charging a fee of 12 basis points a year. Comcast (CMCSA - Free Report) and Home Depot Inc. have an allocation of 5.8% and 5.7%, respectively and occupy the next two spots. The fund bears significant concentration risk with more than 44% allotted to the top 10 holdings. It trades in an average volume of 92,800 shares. The fund returned 10.64% in the past one year and 6.72% in the year-to-date time frame. VCR currently has a Zacks ETF Rank #2 with a Medium Risk outlook (read: Top-Ranked ETFs That Crushed S&P 500 in the Bull Market).
Bottom Line
Though the deal terms are not yet known, we believe there is great potential in this alliance. Amazon is a major player in the global online retail industry and possesses years of experience in the space. This coupled with Souq’s expertise in the Middle East bodes well for the merged company. The deal is expected to be closed by the end of this year.
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Amazon Inks Deal to Acquire Souq.com: 2 ETFs in Focus
After eyeing the Middle East market for quite some time, Amazon has finally made a move. It clinched a deal to buy Dubai-based online retailer, Souq.com. Executives from both companies confirmed that they agreed on the takeover, but did not shed light on the terms of the deal. The deal materialized despite the eleventh hour bid of $800 million by Mohamed Alabbar’s Dubai-based Emaar Malls.
Souq.com was founded in 2005. The online retailer stocks 8.5 million items on its website and generates approximately 50 million monthly visits.
Souq.com Co-Founder and Chief Executive Ronaldo Mouchawar expects to utilize the common values of the two companies to expand the business in the region, which according to him has still not been tapped, as online purchases comprise just 1-2% of overall sales.
According to the two companies, there is tremendous potential in the region and this alliance will help them to become a major player. Per Standard Chartered, e-commerce in the region is growing at 30% annually.
However, competition is expected to intensify in the region when Saudi sovereign wealth fund and Emaar backed Noon is launched with 20 million products and a 3.5 million square feet fulfillment center in Dubai. Amazon and Souq predict that the market has great potential and it can absorb new players.
Though the terms of the deal are not yet known, we will consider the following ETFs that have considerable exposure to Amazon (read: What Made Internet ETFs Outperform in the Bull Market).
Van Eck Retail ETF (RTH - Free Report)
This fund is one of the options offering exposure to the retail sector in the U.S and has a 16.44% exposure to Amazon (read: Is Wal-Mart's Upbeat Q4 a Godsend for Consumer ETFs?).
The fund has AUM of $75.9 million and charges a fee of 35 basis points a year. Home Depot Inc (HD - Free Report) and Wal-Mart Stores Inc. (WMT - Free Report) hold the next two spots with an allocation of 7.92% and 5.87%, respectively. The fund bears significant concentration risk with more than 65% allotted to the top 10 holdings. It trades in an average volume of 27,400 shares. The fund returned 0.96% in the past one year and 3.14% in the year-to-date time frame. RTH currently has a Zacks ETF Rank #2 (Buy) with a Medium Risk outlook (read: Consumer ETFs & Stocks Not Hurt by Soft February Retail Sales).
Vanguard Consumer Discretionary ETF (VCR - Free Report)
This fund is one of the most popular in the space and has an 11% exposure to Amazon.
The fund has AUM of $2.3 billion and is one of the cheaper options charging a fee of 12 basis points a year. Comcast (CMCSA - Free Report) and Home Depot Inc. have an allocation of 5.8% and 5.7%, respectively and occupy the next two spots. The fund bears significant concentration risk with more than 44% allotted to the top 10 holdings. It trades in an average volume of 92,800 shares. The fund returned 10.64% in the past one year and 6.72% in the year-to-date time frame. VCR currently has a Zacks ETF Rank #2 with a Medium Risk outlook (read: Top-Ranked ETFs That Crushed S&P 500 in the Bull Market).
Bottom Line
Though the deal terms are not yet known, we believe there is great potential in this alliance. Amazon is a major player in the global online retail industry and possesses years of experience in the space. This coupled with Souq’s expertise in the Middle East bodes well for the merged company. The deal is expected to be closed by the end of this year.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>