Days ahead of its planned breakup, eBay Inc. suffered a blow in
its effort to sell its eBay Enterprise unit as one of the
division's biggest customers said it would move much of its
business elsewhere.
Toys "R" Us Inc. on Thursday said it would take control of its
own U.S. e-commerce operations by mid-2016, rather than relying on
eBay Enterprise. The announcement comes at an inopportune time for
eBay, which has been in talks with Thomas H. Lee Partners LP to
sell the unit for as much as $1 billion, according to people
familiar with the matter.
The e-commerce company has been searching for a buyer since at
least January, when it said it could also seek a spinoff of the
division. In recent weeks, Thomas H. Lee had outbid other potential
suitors including a grouping of private-equity firms, Apax Partners
and Sterling Partners, people familiar with the matter said.
Even before the Toys "R" Us announcement, talks between eBay and
Thomas H. Lee had reached a standstill over price. The two sides
have discussed a price range of between $800 million and $1
billion, two of the people said. That price would be less than half
the $2.4 billion that eBay paid in 2011 for the unit, then known as
GSI Commerce.
In the hopes of securing a deal, eBay had extended the prior
deadline of June 30 to July 15, which is two days before eBay's
planned split from its PayPal payments unit, according to one of
the people.
There is no guarantee a deal will be reached by then, some of
the people cautioned. Reuters reported earlier that talks continued
between eBay and Thomas H. Lee.
EBay Enterprise helps power the online retail sites for
companies such as IKEA and the National Basketball Association. The
division took in $1.24 billion in revenue last year, a 6% increase
from the prior year, representing about 7% of eBay's $17.9 billion
in sales.
Toys "R" Us, based in Wayne, N.J., said bringing much of its
e-commerce operations in-house would provide it an improved
customer experience. The retailer has been a customer of eBay
Enterprise since 2006, and will continue to use its services in
Europe and Canada.
When eBay bought GSI it had had sales of $1.36 billion in 2010,
which then included retail sites Rue La La, ShopRunner and
Fanatics. Those three companies are now owned by a separate holding
company called Kynetic LLC.
In early 2014, eBay Enterprise lost its president, Chris
Saridakis, who was subsequently sentenced to 15 months in prison on
insider-trading charges related to the sale of GSI Commerce. Craig
Hayman, a former International Business Machines Inc. executive,
now runs the division.
EBay is unloading Enterprise as part of its plan to focus on its
core marketplace. The San Jose, Calif., company is spinning off
PayPal on July 17, making two publicly traded companies.
EBay has been cleaning up other loose ends before its new life
as a stand-alone company. In June, it sold back to Craigslist Inc.
28.4% it had held in the classified-ad site since 2004 for an
undisclosed amount, while also settling remaining litigation.
Earlier this year, eBay pared about 2,400 jobs, representing
roughly 7% of its workforce. Longtime Chief Executive John Donahoe,
who had vigorously fought investor Carl Icahn's initial proposal
for the breakup, is stepping down and will become chairman of
PayPal.
For Thomas H. Lee a deal would give the firm a foothold in
e-commerce, adding to its wide portfolio, which includes MoneyGram
International Inc., Spanish language broadcaster Univision
Communications Inc. and 1-800 Contacts Inc.
The Boston firm, which took retailer Party City Holdco Inc.
public in April, focuses on making investments in three sectors:
business and financial services, consumer and health care, and
media and information services.
Write to Greg Bensinger at greg.bensinger@wsj.com and Gillian
Tan at gillian.tan@wsj.com
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