May 24, 2024

DealBook: EBay to Buy GSI Commerce for $2.4 Billion

DESCRIPTIONJim Wilson/The New York Times EBay’s headquarters in San Jose, Calif.

11:19 a.m. | Updated
In a bid to expand its retail might, online marketplace eBay has agreed to buy GSI Commerce, an Internet marketing services company, for $29.25 a share, or $2.4 billion, eBay announced on Monday.

For eBay, which is best known for its auction site and online payment service PayPal, the addition of GSI will strengthen its position as an online retail powerhouse and make it more competitive with rival Amazon. It is eBay’s biggest acquisition since its $2.6 billion deal for Skype in 2005.

The company is paying a significant premium for GSI, offering its shareholders a 51 percent premium over the closing price on Friday. Shares of GSI surged 51 percent in morning trading, while eBay shares fell 3 percent.

“We intend to lead the next generation of commerce innovation,” eBay’s chief executive, John Donahoe, said in a statement. “With its complementary strengths, GSI will extend the power of our portfolio. With eBay, PayPal, GSI and our global platform capabilities, we are focused on delivering new ways for retailers and brands of all sizes — from sole proprietors to large merchants.”

The deal is expected to close in the third quarter of this year. There is a 40-day “go shop” period during which GSI may consider rival bids.

GSI helps manage the Web sites and online marketing campaigns for several top-tier retail clients, including Toys “R” Us, Aeropostale and Kenneth Cole.

Its suite of services includes payment processing, order management and fulfillment and customer service. Beyond its e-commerce services, the company also owns Retail Convergence, the parent company of Rue La La, which it purchased in October 2009.

With GSI, analysts say, eBay will be able to create a more robust marketplace for its third-party sellers, who have previously relied on competitors, like Amazon, to manage their orders and online marketing efforts.

“EBay can now cross-sell the services that GSI provides to the thousands of power sellers on eBay,” said Jordan Rohan, an analyst with Stifel Nicolaus. “They are paying a reasonable price to be more competitive with Amazon.”

Under the deal, eBay seems less interested in GSI’s Retail Convergence assets, namely Rue La La, a social shopping service that competes with Web sites like Gilt Groupe and HauteLook, which was purchased by Nordstrom in February.

EBay, according to the company’s statement, will divest itself of 70 percent of Rue La La and ShopRunner, both of which, the company says are not “not core to its long-term growth strategy.” The assets will be placed into a new holding company run by GSI founder Michael Rubin. eBay’s decision to shed the majority of Rue La La is an interesting one, considering eBay’s growing interest in the field. The company purchased a German competitor, brands4friends, late last year for about $200 million in cash. eBay will loan the new holding company $467 million.

In Monday’s press release, eBay said the deal was expected to be accretive in 2012 and generate synergies of about $60 million by 2013

Goldman Sachs and Peter J. Solomon Company are advising eBay, while Dewey LeBoeuf is serving as its legal adviser. Morgan Stanley is advising GSI Commerce, while Morgan, Lewis Bockius is acting as its legal adviser. Davis Polk Wardwell is acting as legal adviser to a special committee of GSI’s board.

EBay’s Biggest Deals:

Skype Technologies Sept. 11, 2005 $2.6 billion
GSI Commerce March 28, 2011 $2.4 billion
PayPal July 7, 2002 $1.4 billion
Gmarket April 15, 2009 $1.2 billion
Bill Me Later Oct. 3, 2008 $905 million June 1, 2005 $668 million

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