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EBay sells enterprise unit ahead of PayPal split
[SAN FRANCISCO] E-commerce company eBay Inc said it was selling its enterprise business to a consortium led by private equity firm Permira for US$925 million, as it streamlines its operations ahead of the separation from PayPal Holdings Inc.
Shares of eBay, which also reported a better-than-expected quarterly profit and boosted its share buyback plan by $1 billion, rose as much as 5 per cent in early trading. PayPal was up 4.5 per cent on a "when issued" basis.
The deal leaves eBay with its slow-growing marketplace business, which faces stiff competition from rivals such as Amazon.com Inc.
Analysts, however, were bullish on eBay's prospects as a standalone company. "Ebay will not grow nearly as fast as PayPal but it is a very profitable business that generates tremendous amount of cash - some of which they will be able to return to shareholders," Wedbush Securities analyst Gil Luria told Reuters.
EBay's enterprise business, the company's smallest, was formerly known as GSI Commerce. The business, which eBay purchased in 2011 for $2.4 billion, helps retailers strengthen their online presence and e-commerce capabilities.
The business has since lost customers and seen sluggish growth in the past few years as retailers increasingly move their online operations in-house.
The unit suffered a blow this month when ToysRUs Inc, one of its largest customers, ended a near decade-long contract to launch its own online platform.
The Permira-led consortium of buyers includes Sterling Partners, Longview Asset Management, Innotrac Corp and companies owned by Permira funds.
The sale was announced alongside eBay's second-quarter results, where it reported a 7 per cent jump in net revenue.
Sales were driven by higher demand in the PayPal business it plans to spin off on Friday.
PayPal is slated to begin trading separately on the Nasdaq on July 20, creating a new company that some analysts say will be worth US$40 billion.
Revenue in the company's marketplace business fell 3 per cent, hurt by a strong dollar. Excluding the impact of currency, revenue rose 5 per cent.
Based on proceeds from the enterprise business sale, the company recorded an impairment of goodwill of about US$786 million. It said it expected the deal to close later this year.
Excluding items, eBay earned 76 cents per share in the quarter. Net revenue rose to US$4.38 billion from US$4.10 billion.
Analysts on average expected the company to earn 72 cents per share on revenue of US$4.49 billion, according to Thomson Reuters I/B/E/S.