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Extreme Digital, eMAG to merge

E-tail company Extreme Digital is set to merge with eMAGʼs Hungarian subsidiary to form one of the largest players on the CEE e-commerce market, according to an announcement by Extreme Digital at a press conference attended by the Budapest Business Journal on Thursday.

A new company will be created as a result of the fusion of online electronics retailer Extreme Digital with eMAG Hungary, which belongs to the South African Naspers Group. The center of the new company will remain in Budapest, and all international expansion plans will be controlled from Hungary as well.

Extreme Digital will hold 48% of the new company, with eMAGʼs Hungarian unit holding 52%, according to state news agency MTI.

"My logic is telling me that keeping both brands alive is a good idea," said Balázs Várkonyi, head and co-founder of Extreme Digital, regarding plans for the future use of brand names.

Both Várkonyi and co-founder Gyula Kelemen are set to take leading roles at the helm of the company. Várkonyi told reporters that the transaction has been submitted to the relevant competition authority and, if approved this week, will be closed in Q3 2019, with the merger to be fully completed sometime next year.

Extreme Digital closed a strong year in 2018, posting HUF 36 billion in revenues. At the moment, the company is present in eight countries, and has some 100,000 available products. The company has a 10% share of the Hungarian e-commerce market, with 16 shops complementing its online system. Várkonyi noted that orders originating from outside Hungary already account for 20% of profits.

"With the market knowledge of Extreme Digital, the logistic capacity and professional web system of eMAG, and the financial backing of the South African Naspers parent company, we can become the decisive commerce company of the region," Várkonyi asserted. "The company created via the fusion will be able not only to offer better prices but also higher-quality services to its customers. Thanks to our combined forces, Budapest may become our regionʼs e-commerce center," he added.

"In international e-commerce, size is a decisive aspect," according to Catalin Dit, head of eMAG Hungary. "Henceforth, the leaders and owners of the two companies recognized that by combining our forces, we can become more successful on the Hungarian market, and gain a foothold on the global competitive market."

The Budapest office of Dentons was the legal advisor to Extreme Digital in the transaction.