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eBay Acquisition of Paypal Challenged--Antitrust?
eBay-PayPal Merger Hit With Two Lawsuits
The proposed eBay-PayPal merger has been hit by two lawsuits claiming that the deal represents a breach of the companies' fiduciary duty to shareholders, and that the acquisition price is inadequate. One lawsuit, filed by shareholder, Kathleen Rooney, centers on PayPal's annual report, which hints that the firm's financial results and growth could suffer if any problems arose in its dealings with eBay. "PayPal thus has a tremendous interest in acceding to eBay's demands, and eBay is in a position to ensure effectuation of this transaction without regard to its fairness to PayPal's shareholders", the lawsuit states.
eBay responded with a statement that "the lawsuits are without merit, and [eBay] intends to defend itself vigorously", while PayPal spokesman, Vince Sollitto, added, "these types of legal filings are common, but rarely successful". Rooney also accuses eBay of "unfair dealing", in that "any transaction to acquire the company at the consideration proposed does not represent the true value of the company". eBay had offered 0.39 of its share for each PayPal share in the merger proposal, valuing them at over USD 23 per share when the deal was announced, whereas PayPal valued its shares at USD 13 apiece for its IPO.
The jury "is still out on whether the [merger] will help PayPal become the global digital currency it set out to be, or, more likely, reduce it to a narrow money-transfer service focused on greasing eCommerce for eBay", MSN Business reports. Avivah Litan, of Gartner Group, believes "eBay will narrow the scope for PayPal because PayPal was already running into trouble with its business model" and is still struggling with fraud and other issues. eBay "wanted PayPal, ...to claim any profit from any payments processed on its site [and] to control a business [seen] as crucial to transforming eBay into a mass marketplace", MSN Business notes.
eBay "knows it has to simplify payments and make them seem safer to attract more users, ...and thinks that reducing the payment process to one or two mouse clicks will help", according to MSN Business. But, "that was a tall order when the most popular payment system on eBay was controlled by a competitor", especially when eBay's goal "is to get more Internet buyers on the bandwagon, many of whom still don't understand or trust PayPal". Ultimately, eBay wants to improve its 'velocity of trade' by digitizing more transactions, and aims to reduce its current 60 per cent of paper transactions to 30 or 40 per cent.
The proposed eBay-PayPal merger has been hit by two lawsuits claiming that the deal represents a breach of the companies' fiduciary duty to shareholders, and that the acquisition price is inadequate. One lawsuit, filed by shareholder, Kathleen Rooney, centers on PayPal's annual report, which hints that the firm's financial results and growth could suffer if any problems arose in its dealings with eBay. "PayPal thus has a tremendous interest in acceding to eBay's demands, and eBay is in a position to ensure effectuation of this transaction without regard to its fairness to PayPal's shareholders", the lawsuit states.
eBay responded with a statement that "the lawsuits are without merit, and [eBay] intends to defend itself vigorously", while PayPal spokesman, Vince Sollitto, added, "these types of legal filings are common, but rarely successful". Rooney also accuses eBay of "unfair dealing", in that "any transaction to acquire the company at the consideration proposed does not represent the true value of the company". eBay had offered 0.39 of its share for each PayPal share in the merger proposal, valuing them at over USD 23 per share when the deal was announced, whereas PayPal valued its shares at USD 13 apiece for its IPO.
The jury "is still out on whether the [merger] will help PayPal become the global digital currency it set out to be, or, more likely, reduce it to a narrow money-transfer service focused on greasing eCommerce for eBay", MSN Business reports. Avivah Litan, of Gartner Group, believes "eBay will narrow the scope for PayPal because PayPal was already running into trouble with its business model" and is still struggling with fraud and other issues. eBay "wanted PayPal, ...to claim any profit from any payments processed on its site [and] to control a business [seen] as crucial to transforming eBay into a mass marketplace", MSN Business notes.
eBay "knows it has to simplify payments and make them seem safer to attract more users, ...and thinks that reducing the payment process to one or two mouse clicks will help", according to MSN Business. But, "that was a tall order when the most popular payment system on eBay was controlled by a competitor", especially when eBay's goal "is to get more Internet buyers on the bandwagon, many of whom still don't understand or trust PayPal". Ultimately, eBay wants to improve its 'velocity of trade' by digitizing more transactions, and aims to reduce its current 60 per cent of paper transactions to 30 or 40 per cent.