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eBay is paying $1.2bn for South Korea's leading online auction house Gmarket, which will be combined with eBay's existing Korean auction site - Internet Auction Company.

The two sites will continue to operate separately, but presumably back office operations will be merged and headcount reduced to cut costs.

The Gmarket board of directors have all approved the deal.

For the second quarter ended 30 June 2008, Gmarket grew revenue 26 per cent to $67m and operating income was up 74 per cent to $12.6m.

The purchase still needs to be cleared by South Korean anti-trust regulators.

eBay bought a majority stake of Internet Auction Company - the number two player in Korea - in 2001 for $120m.

The buy makes a lot more sense than eBay's recent inexplicable, and expensive, buys.

The auction house said this week it wanted to offload Skype - the Voip provider it bafflingly bought for $2.4bn in 2005 - and it has also sold StumbleUpon back to its founders for an undisclosed amount.

eBay has already written off $1.4bn of the value of Skype and in January revenues for the fourth quarter fell for the first time in its history. The online tat bazaar watched revenue fall 6.4 per cent while profits were down 31 per cent.

Yahoo! owns ten per cent of Gmarket which it has agreed to sell it to eBay.®

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