Ebay plans to buy e-commerce GSI as it ramps up battle with Amazon
Published 29/03/2011 | 05:00
EBay plans to buy e-commerce service provider GSI Commerce to build up its online marketplaces as it ramps up its battle with Amazon.com.
EBay said yesterday it offered GSI shareholders $29.25 per share, or $1.96bn (€1.39bn), in cash. That comes out to a 50.9pc premium over its closing price on Friday.
GSI shares were up 50.1pc in Nasdaq trading. EBay shares were down 2.6pc.
For eBay, which owns the PayPal payments system and its well-known auction sites and marketplaces, GSI is attractive because of its expertise in taking customer orders, managing them and filling them, an area of strength for Amazon.
"It's one of the few fulfilment operations that could rival Amazon," Colin Gillis, analyst BGC Partners, said.
"Amazon is fulfilling its third-party sellers more and more. EBay is all third-party sellers."
GSI, which owns web businesses such as Rue La La and ShopRunner, also provides retailers such as Aeropostale Inc and TJX Cos Inc's Marshalls chains with technology, payment processing and customer care services for their e-commerce sites.
EBay shares fell on concerns it may be paying too much and might need to invest more money on GSI's technology.
Still, Fred Moran, an analyst with Benchmark Capital, called the price "reasonable", saying it comes out to 13 times this year's expected earnings before certain expenses, which he said "is right in line with the e-commerce peer group".
EBay shares were down 83 cents at $30.87 and GSI was up $9.71 at $29.09 yesterday. Amazon shares were essentially flat.
As part of the deal, eBay will sell off GSI's licensed sports merchandise business, as well as 70pc of Rue La La, which offers one-day only web deals to members, and ShopRunner, a members-only online shopping service that offers free shipping.
EBay said those business were not important to its long-term growth strategy. Those holdings will become part of a new company run by GSI's founder and chief executive Michael Rubin. EBay will lend Rubin's new company $467m. Including the loan, eBay said the deal was worth $2.4bn.
EBay said the acquisition, expected to close in the third quarter of 2011, would have little effect on its fiscal 2011 adjusted earnings forecast, and would add to 2012 earnings. The deal would hurt 2011 net income by 30c to 34c per share, the company said.
GSI has until May 6 to solicit bids from other parties during the so-called "go shop" period.
While PayPal has been driving eBay's growth for years, the company is also trying to lift its more familiar marketplaces unit -- a high-margin business that connects online buyers and sellers -- especially as Amazon, the world's largest an online retailer, has enjoyed double-digit revenue growth.
The GSI deal follows a number of other e-commerce deals in recent months. Amazon expects to close its purchase of Quidsi, operator of diapers.com, around April 1.