eBay (
EBAY
), which competes with other e-commerce sites like Amazon (
AMZN
), Wal-Mart (
WMT
), Overstock (
OSTK
), and Blue Nile (
NILE
), recently decided to acquire GSI Commerce for $2.4 billion. We
believe that this acquisition will make eBay's marketplace more
attractive for merchants of all sizes and add significant value to
the company's stock.
We have a price estimate of $32.81 for eBay
stock
, implying a roughly 5% premium to market price.
Possible Synergies for eBay
This acquisition will allow eBay to compete more effectively
with online retailers such as Amazon by enabling more merchants of
all sizes to conduct e-commerce. The new platform will attract
buyers who prefer the simplicity of buying at fixed prices and
merchants who prefer selling at fixed prices. GSI Commerce will
bring order-management, fulfillment, and shipping business to eBay
(including packing up orders for shipment). The deal will also put
eBay in better position to help merchants of all sizes to better
leverage mobile and social commerce for growth.
eBay and GSI aim to move towards a common platform after 2011 to
serve retailers of all sizes across eBay, Paypal and GSI. eBay
anticipates that the acquisition could add to its bottom-line from
2012 onwards, even though it may put negative pressure on operating
profits in the near-term.
10% Upside to Our $32.81 Value Estimate for eBay
Stock
Here we consider the scenario where GSI lifts the number of
merchandise listings on eBay's marketplace by an additional 2%
beyond our base case forecast (base case depicted in modifiable
chart above).
Given a 2% increase in listings beyond our base case, it is also
reasonable to assume that this scenario would produce a 1% increase
in EBITDA margin beyond our base projections (annually) for eBay
marketplaces. This would push EBITDA margin back up towards 2007
levels by the end of our forecast period.
This scenario (higher listings and EBITDA margin), combined with
the appropriate $2.4 billion deduction in eBay's cash balance,
would suggest 10% upside to our base case price esitmate of
$32.81 for eBay stock
, putting our number near $36. You can test this scenario, and
others, by dragging the trend lines in the interactive charts
featured here.
About GSI Commerce
GSI Commerce provides products and services to over 2,000 brands
globally, including Toys 'R' Us®, the National Football League®,
Aeropostale®, Polo Ralph Lauren®, Dick's Sporting Goods®, Dell® and
Estee Lauder® through its 3 business segments - Global e-Commerce
Services, Global Marketing Services and Consumer Engagement. While
the company operates on a global basis, the vast majority of its
revenues are derived from its North American operations.
In 2010, GSI Commerce had net revenues of nearly $1.4 billion,
in which product sales contributed $777 million and service fees
contributed $581 million. The company's reported net loss was $36.5
million.
See our full analysis and $32.81 price estimate for
eBay