EBay on Monday announced it had agreed to buy GSI Commerce, a provider of ecommerce and interactive marketing services, for $29.25 a share, which works out to around $2.4 billion. Under terms of the deal, the transaction is to be financed with cash and debt, and expected to close in the third quarter of 2011. In coming up with that time frame, eBay probably wasn't expecting a lawsuit, but it got one anyway.
According to a Bloomberg report , Southeastern Pennsylvania Transportation Authority (Septa), which operates trains and buses in the Philadelphia area, filed a lawsuit against the companies and GSI officials claiming $2.4 billion represents a "bargain price" and that GSI is worth much more.
"The consideration proposed as part of the transaction is inadequate," lawyers for Septa, a GSI shareholder, said in court papers. "GSIC, with its stock price depressed but its future prospects golden, was a prime target for eBay."
GSI stocks jumped 51 percent from their previous closing price of $19.38 following news of the deal, and as far as eBay is concerned, "the suit is without merit." It's actually a little more complicated that that. Part of the issue is what eBay plans to do with the transaction. Citing court papers, Bloomberg says eBay plans to divest all of GSI's licensed sports-merchandise business and 70 percent of online retail sites Rue La La and ShopRunner. EBay plans to sell those assets to NRG Commerce LLC, a company set up by GSI's current CEO, Michael Rubin, as well as loan the company $467 million.
As far as Septa's lawyers are concerned, all this amounts to little more than "a Rubin-led leveraged buyout of key company assets" in order for him to "reap their true value for himself."
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