Merger of Extreme Digital and eMAG to create leading online retailer in CEE

Merger of Extreme Digital and eMAG to create leading online retailer in CEE
By Levente Szilagyi in Budapest March 21, 2019

Hungary's two leading online electronics retailers Extreme Digital and the Hungarian subsidiary of eMAG, a unit of South Africa's Naspers, announced their merger on March 21, creating one of the largest online retail networks in Central and Eastern Europe.

The transaction is pending approval from the competition authority GVH, which is expected to be closed in the third quarter. Extreme Digital will hold 48% of the new company, with eMAG's Hungarian unit holding 52%.

The merger will pave the way for eMag to enter into five new regional markets where Extreme Digital is already present: Austria, Croatia, the Czech Republic, Slovakia, and Slovenia. Besides Hungary, eMag currently operates in Romania, Bulgaria, and Poland. 

In November 2018 eMag opened a 126,000 sqm warehouse close to Bucharest, the largest warehouse in Central and Eastern Europe. 

The company resulting from the merger will have annual revenue of around HUF70bn (€220mn). Extreme Digital, which reported HUF36bn in revenue last year in 2018, was founded in 2001 by two Hungarian businessmen. Over the years it has grown to become the country's leading online retailer. At present, it has 16 stores in Hungary and is present in eight countries. It employs 320 workers and fulfills more than 1mn orders a year via online and offline channels.

Last year, the two Hungarian owners purchased back the majority of the shares of the company from Steinhoff International after selling the company in 2015 to the South African group.

Online sales in Hungary are growing at a pace three-fold that of retail sales, around 17-18%, and accounted for 4.5% of total retail sales turnover last year. According to eNet Internet Researcher, online retail sales in Hungary reached HUF1 trillion (€3.2bn) last year.

Hungarian webshops made up only half of the amount, as price-conscious customers are turning to foreign retailers such as Amazon or Chinese Alibaba.

A report by economic researcher GKI showed that the number of active online shoppers reached 3.2mn and the average transaction value exceeded HUF11,000, up from HUF10,000 a year earlier.