New Company Will Emerge in Wake of eBay’s Acquisition of GSI Commerce

EBay is acquiring GSI Commerce today for $2.4 billion, but not exactly all of it.

As part of the acquisition, it will spin off a few of the company’s properties to create a well-funded new entity that will be led by GSI’s founder and CEO Michael Rubin.

EBay said it will acquire GSI to help retailers and big brands move into both online and mobile commerce. GSI helps more than 180 leading retailers and brands, including Timberland, RadioShack, Calvin Klein, Levi’s and Ralph Lauren.

But eBay and GSI have identified a few parts of the business that will remain independent.

EBay said it will divest GSI’s licensed sports merchandise business and 70 percent of ShopRunner and Rue La La. EBay will loan the holding company $467 million and retain a 30 percent stake in Rue La La and ShopRunner. In addition, Rubin will invest $31 million in cash.

Rue La La operates in the emerging flash-sales business, competing against companies like Gilt Groupe. GSI purchased Rue La La in 2009 for $350 million in cash and stock. Meanwhile, ShopRunner is similar to Amazon’s Prime membership. It charges members $79 a year for unlimited free two-day shipping with no minimum order from a variety of retailers across the Web.

The spin-off will also include Fanatics, a Jacksonville, Florida-based company that operates more than 250 e-commerce Web sites, including 60 e-commerce stores for collegiate and professional sports. GSI’s acquisition of the company closed only two weeks ago.

While all these companies sound complementary to eBay, the company said they are not core to its long-term growth strategy.

In a conference call this morning, eBay President and CEO John Donahoe, explained that it was important to spin off Fanatics and GSI’s sports licensing business because “we don’t want to be in competition with sellers, and that business would be in competition with them.”

As for Rue La La and Shoprunner, the reasons were a little different. “I would characterize it as a near-term operating loss and a huge opportunity that if we tried to realize, we’d probably screw it up. In Michael, we see a guy who can take those concepts to a level we couldn’t imagine, and our 30 percent investment is our indication of what we think Michael could do over time,” he said.


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