March 28, 2011, 5:07 PM — Wall Street's initial reaction to eBay's announced acquisition of ecommerce services player GSI Commerce (NASDAQ: GSIC) for $2.4 billion could be summed up in two words: eBay overpaid.
(Also see: Is eBay on the decline?)
The online auction giant's offer of $29.25 a share was 51 percent above GSI's Friday closing price. Naturally, GSI shares soared in Monday's session to 29.20, a gain of 50.7 percent.
Shares of eBay (NASDAQ: EBAY), meanwhile, fell 1.36, or 4.3 percent, to 30.34.
The acquisition is an aggressive move by eBay to better position itself in the ecommerce market as the growth of its legacy online auction business slows. Among the companies that eBay will compete directly in the ecommerce sector is Amazon.com (NASDAQ: AMZN), which slipped 1.63, or 1.0 percent, to 169.35.
eBay must really see potential in GSI's business to pay such a premium. GSI shares were trading near a 52-week low of 17.77 at the time the deal was announced. The purchase price of $29.25 is near the 52-week high of $31.35.
It's the second-biggest acquisition eBay has made. The company spent $2.6 billion in 2005 to purchase Internet phone company Skype, which it sold off four years later.
GSI has more than 180 customers in 14 merchandise categories, including Adidas, Calvin Klein, Dockers, Mattel, Major League Baseball, PBS and RadioShack. (Here's a comprehensive list of clients. It's pretty impressive.)
"We intend to lead the next generation of commerce innovation. The acquisition of GSI, which offers the most comprehensive integrated suite of online commerce and interactive marketing services available, will significantly strengthen our ability to connect buyers and sellers worldwide," John Donahoe, eBay president and CEO, said in a statement. "Combined with eBay Marketplaces and PayPal, we believe GSI will enhance our position as the leading strategic global commerce partner of choice for retailers and brands of all sizes."
What it won't do is enhance eBay's position in the licensed sports merchandising business. eBay is selling all of that business to GSI founder and CEO Michael Rubin, along with 70 percent of GSI's ShopRunner and Rue La La.
As a result of the deal, eBay revised its long-term revenue forecast to $14 billion to $16.3 billion in 2013, up from its most recent guidance of $13 billion to $15 billion.
The deal is expected to close in the third quarter.
Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.