The deal, announced Monday, represents eBay's efforts to expand beyond its flea-market auction roots into a more viable competitor with online giant Amazon.com. It comes as online retailing is moving beyond the PC to the smartphone.
"The boundaries are blurring," eBay chief executive John Donahoe said in a conference call. "We talked about that mobile and smartphones are absolutely bringing off-line retail online at a pace that's far greater than it was."
GSI Commerce operates behind the scenes, designing everything to do with e-commerce, from a retailer's website, to shopping-cart components, to electronic payment and fulfillment.
Its clients are a roster of big-name retailers, among them Dockers, Timberland, Aeropostale, Toys R Us, Modell's, RadioShack, Bath & Body Works, Godiva Chocolatier, and QVC.
"When you look at it across our portfolio, what we now have is a capability that extends from sole proprietors to small businesses now squarely into the large merchants. And you see the large-merchants market is enormous, $160 billion in the U.S.," Donahoe said.
The deal was a head-spinner on Wall Street. Shares of GSI Commerce, trading at 40 times the normal volume, rose 50 percent on the news that eBay would tender $29.25 per share in cash.
And no wonder - the eBay offer represented about a 50 percent premium over Friday's closing price of $19.38 per share.
Shares closed at $29.20 on Monday.
The $29.25 per share bid wasn't enough for at least eight law firms, which announced Monday that they would launch investigations into the sale because some analysts had valued the company even higher.
With a 6.42 percent stake in GSI and about 4.3 million shares, Rubin is the fourth-largest shareholder of the company that he started.
GSI and eBay did not respond to interview requests.
Munir Mandviwalla, chairman of the management information systems department at Temple University, said the deal should be considered a compliment to GSI because, he said, eBay needs to improve its reach.
"There are only so many ways you can grow the flea-market part of the equation," he said. "For them to continue to grow, they need to look at different markets."
Donahoe said eBay, which also owns PayPal, would run GSI Commerce as a "third leg," led by Chris Saridakis, a former Gannett Co. Inc. executive who now heads GSI Commerce's marketing services division.
When the music stops, eBay will spin off GSI's sports-licensing businesses and 70 percent of two other GSI acquisitions, Rue La La and ShopRunner. They will become part of a holding company run by Rubin; eBay will lend the holding company $467 million and Rubin will chip in $31 million in cash.
ShopRunner is a buyers' club that promises free shipping in return for a membership fee. Rue La La is a more high-end buyers' club whose customers must be invited to join. GSI has yet to complete its acquisition of Fanatics Inc., a Florida company that sells licensed sports merchandise online. The $277 million acquisition was announced Feb. 9.
What's not clear is how many GSI Commerce employees will join eBay and how many will move to Rubin's spin-off. Nor is it clear whether $40 million in synergies created by the deal will translate into GSI job losses, and if so, how many and where.
The transaction is set to close in the third quarter. Meanwhile, until May 6, GSI Commerce can shop for a better offer with the proviso that eBay gets an opportunity to counter it.
Sold - for $2.4 Billion
GSI said Monday that it was being bought by eBay.
GSI Commerce Inc.
Headquarters: King
of Prussia.
Founded: 1999, as
Global Sports Inc.
Business: Runs websites
for retailers.
Key customers: Include Toys R Us, Bath & Body Works, Radio Shack, American Eagle Outfitters,
Ace Hardware.
Employees: 4,890
as of Jan. 1.
2010 revenue: $1.4 billion.
2010 loss: $36.5 million.
eBay Inc.
Headquarters: San Jose, Calif.
Founded: 1995.
Business: Online auction site, PayPal online- payments system.
Users: An estimated 94 million worldwide, buying and selling $62 billion in goods in 2010.
Employees: 17,700
as of Dec. 31.
2010 revenue: $9.2 billion.
2010 profit: $1.8 billion.
SOURCES: GSI Commerce, eBay, Bloomberg News, Associated Press.
Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.
Inquirer staff writer Joseph N. DiStefano contributed to this article.
