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March 30, 2011

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Ebay looks to rival Amazon

ONLINE marketplace operator eBay said it will pay US$2.4 billion for GSI Commerce, which operates websites for retailers like Toys R Us and Bath & Body Works.

EBay Inc said Monday the acquisition will bolster its ability to connect buyers and sellers around the world. It could also help it become more of a threat to Amazon.com Inc.

GSI runs websites, packs and ships products and offers interactive marketing services to a variety of retailers. It has long-term contracts with 180 retailers, including Radio Shack, Ace Hardware and American Eagle Outfitters.

EBay has been working on improving its eBay.com website by doing things such as revamping its home page, cutting upfront listing fees it charges sellers and bolstering its search engine. In an interview, eBay CEO John Donahoe said the GSI deal fits in with his company's efforts to help retailers grow.

"Commerce is at an inflection point where the lines between online and offline commerce are blurring. We see retailers of all sizes, merchants of all sizes, looking for partners that can help them grow their businesses."

Lots of businesses need help doing things like generating demand for products, running their websites, delivering goods to customers, and growing their mobile sales, Donahoe said. GSI does this for large companies, and eBay and PayPal do this for small- and medium-sized firms, he said, which makes the acquisition a natural fit.

The purchase might also help eBay compete with Seattle-based Amazon, which, in addition to selling many items directly, allows merchants to sell their products through its site and offers product fulfillment services, too.

San Jose-based eBay said it will pay US$29.25 per share, a 51 percent premium to GSI's closing price last Friday.

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