PhillyDeals: Michael G. Rubin is dealing again, this time with eBay

GSI Commerce of King of Prussia is to be sold to eBay, which will sell parts of it back to CEO Michael G. Rubin.
GSI Commerce of King of Prussia is to be sold to eBay, which will sell parts of it back to CEO Michael G. Rubin.
Posted: April 05, 2011

For the second time in a decade, Michael G. Rubin is selling the business he heads - and keeping some of it, too.

Online-auction manager eBay has big plans for its latest proposed Philadelphia-area acquisition, GSI Commerce, which employs approximately 1,000 workers at its King of Prussia headquarters and thousands more at warehouses across North America.

But Rubin isn't just selling his company, the publicly traded GSI. He's also buying back the parts he wants, with eBay's blessing, plus eBay financing for further expansion.

"This is a great thing for Philadelphia," promises GSI executive Michael Golden, 41, a Villanova Law School graduate. Golden has been a fan of Rubin, 38, and a serial collaborator with him, since Rubin sold used ski equipment from his parents' basement while the two were students at Plymouth Whitemarsh High School.

The businesses Rubin keeps "will be looking for another headquarters," Golden said, "somewhere in the western [Philadelphia] suburbs." And yes, "we'll be going into hiring mode."

As eBay bulks up to compete with its larger online-sales rival, Amazon.com, the company has agreed to pay $2.5 billion for GSI, 10 times what it paid for an earlier, much smaller local firm, half.com, at the peak of the Internet bubble.

EBay says that if the deal is completed, it will leave GSI executive Chris Saridakis and his team in charge of the company's main business, filling online orders for Toys R Us, Dick's Sporting Goods, and other big retailers.

EBay has agreed to sell Rubin and his partners back three key GSI business components:  sports marketing (for the NFL, NBA, NHL, NASCAR, and NCAA schools, among others); a specialty shopping service, Rue La La; and ShopRunner, a year-old online-retail service that promises free home delivery and steady discounts for its $79 yearly fee, and counts Lord & Taylor, Olly Shoes, and Haggar among its clients.

As "a well-capitalized private company," instead of a public company like GSI, "we gain a ton of flexibility" and can focus on "long-term value," instead of quarterly earnings and analyst calls, Golden told his lieutenants at the related businesses in an e-mail Monday morning, after a marathon Sunday strategy session with Rubin.

Golden runs ShopRunner. He says the eBay deal recalls Rubin's previous sale, in the early 2000s, of Ryka women's footwear and other shoe and sporting-goods companies, to concentrate on building his fledgling Global Sports Interactive into GSI.

"Michael, since he was 13, has gone from retail, to wholesale, to manufacturing, to supply chain, to e-commerce, to marketing, to the private-sales business," Golden said. "We believe that ShopRunner can be as big or bigger than GSI, if we execute it properly."

Suing for more

Not everyone is a fan of the eBay-GSI deal.

SEPTA's $600 million pension fund has sued, in Chancery Court in Delaware, to demand eBay pay more. The deal is set at a price more than GSI's recent share value, but less than its 2010 stock-market high.

SEPTA is also considering joining Dauphin County's pension fund and other investors in pushing Frazer drugmaker Cephalon to consider a hostile $5.7 billion takeover offer from Canada-based Valeant Pharmaceuticals Inc.

The GSI-eBay deal has the potential to create two expansive, locally based sales organizations and many jobs. Valeant says it will cut Cephalon's expenses by 25 percent if its takeover succeeds, endangering Cephalon's Chester County science and sales workers, who number about 1,000.

Do public workers' pension funds consider whether the legal actions they pursue will help or harm local employers and workers (who are also Pennsylvania taxpayers) when they file suit in search of a few more bucks?

No, says SEPTA general counsel Nicholas Staffieri. "We have a fiduciary duty to the taxpayers of the Commonwealth of Pennsylvania," who subsidize the train, trolley, and bus service, "to protect our pension fund," he said.

"It is unfortunate if people lose their jobs. But we can't escape the fact that 12,000 [SEPTA] people depend on that fund, and many more will depend on it" when they retire.


Contact columnist Joseph N. DiStefano at 215-854-5194 or JoeD@phillynews.com.

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