Consumer discretionary

Groupon Inc (NASDAQ:GRPN) Syndicates Global Operations, Sells Indonesian Unit to KFit

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Budding fitness startup KFit acquires Groupon’s Indonesian unit, in a bid to expand its global reach

The provider of online deals, Groupon Inc. (NASDAQ:GRPN), has faced increasing pressure from its shareholders in the past three months, as the company witnessed a 26% decline in its share price, right after its first quarter earnings call. The ecommerce company has disclosed its intention of selling its Indonesian business to a budding fitness startup, KFit. While much of the deal’s financial implications remain a secret for now, under the deal Groupon will become a shareholder of the company.

KFit was founded by Joel Neoh back in April 2015 to provide customers unlimited access to fitness studios and gyms for a pre-defined monthly fee. The 1-year-old startup plans to expand its reach in the Indonesian market with the aforementioned acquisition and make use of Groupon’s strong local platform which is home to over thousands of merchants and a million subscribers. Furthermore, Groupon expects the entire acquisition to close by the end of the third quarter of 2016.

KFit CEO Joel Neoh shared his thoughts on the strategic merger with the online deal platform as he quoted: “Indonesia represents an untapped opportunity for us and serves as a natural expansion of our regional footprint in Southeast Asia. The combination of Groupon Indonesia’s established presence and KFit’s experience in building a mobile-first platform will propel us in a high-growth local commerce market, further accelerated by increasing mobile penetration.”

Groupon posted mixed financial results for its first quarter of 2016 in April. The company reported adjusted loss per share of one cent, compared to a consensus estimate of two cents. Revenues came in at $732 million, surpassing the Street’s expectations of $718.3 million. Groupon’s gross billings also slumped 5% to $1.47 billion, compared to same period last year.

Following its weak quarterly performance, analysts at RBC Capital cut their rating on the stock from Sector Perform to Underperform, highlighting the “deteriorating fundamentals” in the March quarter. The research firm also lowered its 12-month price target on the stock from $4 to $3. Groupon stock has now slipped more than 42% over the last 12 months, compared to the NASDAQ Composite Index which fell nearly 2.5% through the same period.

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