A1B2C4

eBay acquisition of GSI Commerce (2011)

Deal and post-transaction litigation analysis

Alexander Asen Steven Church Gabriela Engler Pinto Kelly Gutmann Manuela Lisboa Stacy Marquez Martin M. Saravia Laconi Julia Twarog Andrew Wark Yasmin Weber April 2012

Agenda

The Parties The Deal Acquisition Rationale Divesture Rationale Transaction Timeline Divestiture – Stock Purchase and Loan Agreements The Litigation Acquisition Structure Anticipated Litigation The Settlement Q&A

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This deal was a big deal

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eBay wants to buy certain parts of GSI Commerce – but only the parts that further its strategy to compete with Amazon

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Solution: eBay will buy the whole company, then sell off the unwanted parts (“Excluded Assets”)… – – …to GSI CEO Michael Rubin, via separate transaction (“the Divestiture”) …while maintaining interest in a few of the Excluded Assets

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The solution is great for eBay and Rubin… – … but are GSI shareholders being left out?

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Given the potential conflict of interest, litigation was inevitable… – … but the dealmakers had anticipated this in the main transaction

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… and designed the Merger Agreement to stave off litigation – … as well as other moral hazard and information asymmetry problems

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The shareholders settled quickly, and for a low price… – … and transactional lawyers won Deal of the Year for their elegant handling of this multi-stage transaction

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The Parties

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[video removed] http://www.youtube.com/watch?v=YKtlK7sn0JQ

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Ebay’s two segments

Marketplaces

Payments

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eBay – Paypal

[video removed] http://www.youtube.com/watch?v=sLfm0Wwdikg

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eBay - History

1995: French-born Pierre Omidyar started an experiment in San Jose, California 1998: IPO, shares up over 160% on the first day 2004: Stock price hits peak 2009: Gross merchandise volume decline for the first time

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eBay Inc. – 2010 Financial Data (1/4)

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$5.6 billions in cash and cash...