EBay on Monday said it was acquiring GSI Commerce, which provides e-commerce fulfillment and online marketing services for retailers, in a deal worth $2.4 billion.
That price tag works out to $29.25 a share for GSI, a 51 percent premium to GSI's Friday closing price. EBay said it will fund the GSI purchase with a combination of cash and stock. The acquisition isn't expected to ding non-GAAP earnings in 2011, but will shave 30 cents a share to 34 cents a share from GAAP earnings.
The acquisition extends what eBay is able to offer retail businesses from the current shelf-space (eBay Marketplaces) and payment method (PayPal) model to a more complete line-up. Significantly, it adds to eBay's arsenal direct-to-customer fulfillment, including shipping and branded packaging, putting it on more level ground to compete with Amazon.
On a conference call, eBay executives noted that eBay is a partner to traditional retailers, not a competitor like Amazon.
Why would eBay pay up for GSI? The company is looking to swipe some fulfillment customers and get tighter with traditional retailers. GSI has 180 customers and runs the e-commerce stores for Dicks Sporting Goods, PetSmart and Toys R Us to name a few. EBay said it will divest GSI's sports merchandise business and 70 percent of ShopRunner, a service similar to Amazon Prime, and Rue La La. Those assets will be sold to a holding company run by GSI founder and CEO Michael Rubin.
From eBay's statement announcing the acquisition:
"We intend to lead the next generation of commerce innovation. The acquisition of GSI, which offers the most comprehensive integrated suite of online commerce and interactive marketing services available, will significantly strengthen our ability to connect buyers and sellers worldwide," said John Donahoe, eBay Inc. President and CEO. "Combined with eBay Marketplaces and PayPal, we believe GSI will enhance our position as the leading strategic global commerce partner of choice for retailers and brands of all sizes."
As for eBay, the addition of GSI puts it on a direct collision course with Amazon, which has targeted eBay's marketplace. Donahoe recently outlined eBay's strategy to be the glue between brick-and-mortar and Internet commerce. It's possible that GSI will be a way to better integrate services like PayPal with traditional retailing.
Other odds and ends from the deal:
- EBay is expecting synergies of $60 million by 2013.
- The deal will add to earnings in 2012.
- EBay will loan Rubin's holding company $467 million and keep a 30 percent stake in Rue La La and ShopRunner. Rubin will invest $31 million in the new company.
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