permira

EBay to Sell its Enterprise Unit to Private Equity

by

July 17, 2015

 

EBay Inc. is currently planning to spin off its PayPal transaction business, but the company’s business changes aren’t limited to that sale. The company announced on Thursday it’s selling off its enterprise unit to private equity in a deal worth $925 million.

 

The Deal

 

The deal was first announced by the Wall Street Journal that speculated private equity firm Permira to have made an offer to eBay the company couldn’t resist. The newspaper cited insider sources and now the deal looks to have gone through.

 

The company has been looking for a buyer for the Enterprise unit since January. At the time, the company announced it wants to get rid off the unit that is focused on aiding online retail sites for global companies, as it hopes to streamline its operations. The unit was formerly known as GSI Commerce.

 

Analysts were expecting the unit to go for less, but it seems the private equity was determined to get the ownership of the unit. Other private equity firms had been mentioned being interested in the unit – Thomas H. Lee Partners was thought to have been willing to pay $1 billion.

 

EBay’s Recent Performance

 

The company also announced its recent performance report on Thursday. The company’s e-commerce operations saw sales figures decrease by 3%, although this was mainly down to the strength of the dollar. According to reports, the revenue increased by 5% if the effects of foreign exchange are excluded.

 

Victor Anthony, an analyst at Axiom Capital Management, said in a Bloomberg interview, “PayPal has been growing strongly for the past several years, so this is really about the e-commerce business. They’re not out of the woods yet, but better growth rates show investors that things are starting to improve.”

 

The company’s total revenue grew more than analysts expected. The total company revenue, including the enterprise unit, totalled $4.68 billion, even though some analysts were expecting it to sit at $4.49 billion.

 

The company is trying to streamline its operations and focus solely on the e-commerce operations. The company is facing tough competition from Amazon, and in China, Alibaba dominates the e-commerce platforms. It’s interesting to see how the company’s restructure will pay off.

 

Permira-Led Consortium

 

The company paid $2.4 billion for the Enterprise unit in 2011, so the private equity firm made a good deal in terms of price. The unit has been struggling to maintain retailers interested in its services, as many global companies are using in-house staff to take care of their online platforms.

 

The private equity firm is not the only party in the deal either. It leads a consortium of investors that include Sterling Partners and Innotrac Corp, as well as companies owned by Permira’s funds.

 

The private equity fund currently has around €25 billion committed capital. It has made over 200 private equity investments since it started in 1985 and the firm has been investing in a number of different sectors.

 

Representatives from both companies haven’t been making any official statements. According to the official press release, the deal is expected to close in the second half of the year. It is still subject to regulatory approvals.

Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedIn