EBay makes bid for PayPal

EBay announced today (Monday) that it has agreed to buy online payment provider PayPal in a stock swap valued at $1.5bn (£990m).

EBay announced today (Monday) that it has agreed to buy online payment provider PayPal in a stock swap valued at $1.5bn (£990m).

The auction powerhouse hoped that the deal would make buying and selling merchandise online even more convenient for its 46 million worldwide users by providing them with an integrated payment system.

The acquisition, which is expected to close by the end of this year, is subject to approval by stockholders and regulatory agencies. EBay has agreed to acquire all outstanding shares of PayPal in a tax-free, stock-for-stock transaction, the company said.

The $1.5bn estimated purchase price is based on the value of PayPal's stock last Friday. The actual purchase price may vary depending on when the transaction closes and the fluctuation of share values.

Nearly 60% of PayPal's business already takes place on eBay, while the rest is handled by small merchants eBay hopes to woo to its site, the companies said.

PayPal is also looking to widen its scope by accessing eBay's broad user base, the companies added.

Under the terms of the proposed deal, PayPal would continue to operate as an independent brand but would phase out its gaming business because of the uncertain regulatory environment surrounding gaming.

For its part, eBay planned to discontinue its existing payment service, eBay Payments by Billpoint, at the close of the transaction.

EBay said that it expects to incur incremental charges for stock-based compensation and amortisation of intangible assets of $4m (£2.6m) and $9m (£5.9m) per quarter if the deal goes through.

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