EBay last week reached an agreement to acquire GSI Commerce, the operater of e-commerce websites for many sporting goods chains and a few sports-related brands, for $2.4 billion. Best known for its online auction site for individuals and smaller businesses, eBay with the acquisition is expected to gain a firmer foothold in filling orders for large retailers with the goal of better competing against Amazon.
The merger price of $29.25 a share represented a 51% premium over GSI's closing share price the previous trading day, March 25.
EBay said the deal will connect eBay sellers with GSI Commerce’s services including e-commerce infrastructure and design, processing online payments, fulfilling orders and customer service. At the same time, eBay plans on providing GSI's over 180 retail and vendor clients with eBay's web prowess and the company’s PayPal payments unit.
“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,” said John Donahoe, eBay Inc. president and CEO, in a statement.
On a conference call with analysts, Donohoe said eBay and GSI will offer technology and services as either a complete, bundled package or on an a la carte basis. “PayPal, GSI and eBay will be at the table for retailers and say, ‘How can we help you?’” he says.
Starting out as Global Sports with a focus on sporting goods, GSI's client base include Dick's Sporting Goods, Eastern Mountain Sports, Modell's, Olympia Sports, SportChek, Sports Authority and many others. In the licensed sports arena, clients include ESPN, MLB, NASCAR, NBA, NFL, NHL and the San Francisco 49ers. But its client list has expanded to a wide array of retailers and brands, including RadioShack, Bath & Body Works, Toys “R” Us, Zales, TJX, DKNY, Expedia and Nautica. Sports-related client vendors include Adidas, Speedo, Timberland, Helly Hansen and Quiksilver.
EBay will divest much of its interest in several parts of GSI’s business, including 100% of GSI’s Fanatics Inc. unit, which sells licensed sports merchandise. GSI purchased Fanatics last month for $277 million. EBay will also sell off 70% of flash-sale site Rue La La and 70% of ShopRunner, the shipping program GSI launched last year that aims to compete with Amazon’s Prime shipping program. EBay believes the licensed sports merchandising and private-sale businesses “are not core to its long-term growth strategy.”
GSI’s founder and CEO Michael Rubin will run ShopRunner, Rue La La and the sports merchandising business as part of a separate holding company. EBay will loan the holding company $467 million and retain a 30% stake in ShopRunner and Rue La La businesses. Rubin will invest $31 million in that deal.
Under terms of the acquisition, GSI Commerce will operate as a separate business unit headed by Chris Saridakis, who is the current CEO of GSI’s marketing services division. EBay will also take over seven of GSI's nine fulfillment centers.
The acquisition is expected to close in the third quarter of 2011, pending regulatory and shareholder approvals. Under the terms of the deal, GSI may solicit acquisition proposals from other parties for a 40-day “go-shop” period that continues through May 6.
EBay expects the transaction to result in synergies of approximately $60 million by 2013; the company expects the transaction to be EPS neutral in 2011 and accretive in 2012.
