Ebay to purchase GSI Commerce for $2.4B
Ebay Inc. is trying to speed past Amazon.com. On Monday, the famous online marketplace announced a deal to purchase e-commerce and marketing service provider GSI Commerce, owner of designer and luxury goods flash sale site Rue La La, for $2.4 billion.
While this is a big departure from the company’s traditional auction interface, the move will mean powering up eBay’s fulfillment and customer service operations.
The auction site then plans to turn around and unload 70 percent of Rue La La and likewise 70 percent of its e-commerce retail aggregator ShopRunner, an action some find surprising, considering eBay’s purchase of brands4friends, a similar site from Germany, and Nordstrom’s recent acquisition of competitor site Hautelook.
As eBay considers the two enterprises “not core to its long-term growth strategy,” both companies will be sold to a holding company to be guided by GSI CEO Michael Rubin, who will leave GSI when the agreement is finalized, likely in the third quarter.
Retaining the remaining 30 percent stake, eBay will then sit and see what Rubin is able to accomplish, said eBay president and CEO John Donahoe, reported WWD.
“The number of retailers, large and small, that have come to us saying, ‘We’re grappling with how you deal with mobile commerce…,’” Donahoe said to WWD. “‘We’re grappling with how to deal in a social commerce world.’ ‘We’re grappling with how to go global.’ It’s been striking, and that, we believe, represents an opportunity for our company. And so our strategy that we’ve outlined for the last several years where we connect buyers and sellers, we see GSI Commerce fitting squarely in that strategy because what GSI Commerce in essence does is enables large sellers, large retailers and brands to meet buyers successfully and effectively.”
The purchase will be eBay’s biggest since 2005, when it acquired Skype for $2.6 billion.
Analysts seem to agree that this deal could land eBay in a key position to battle Amazon.com Inc.’s giant share of the online retail market, forecasting Amazon’s 2010 sales at around $44.93 billion, with eBay coming in at $10.47 billion.
“Net net, seems like a logical step for eBay, basically a ‘buy-over-build’ decision,” RBC Capital Markets analysts Ross Sandler to WWD. “The company is buying relationships with several top retail brands, and PayPal and Marketplaces should see acceleration once these megaretailers are integrated, assuming that happens over the next few years, which doesn’t appear to be baked into the updated guidance.”
GSI has a window of 40 days to go after better bids.