CyberSource Goes Small For Authorize.Net

Electronic payments firm CyberSource, which traditionally focuses on managing payments for mid-sized and enterprise customers, today announced an
agreement to acquire Authorize.Net and its 175,000 mostly small-business customers.

According to a statement, CyberSource will
acquire Authorize.Net in a stock and cash transaction valued at
approximately $565 million. Authorize.Net shareholders will
receive 1.1611 shares of CyberSource common stock for every share of
Authorize.Net common stock.

Additionally, shareholders will receive a
pro-rata share of approximately $125 million in the form of a cash
payment.

In Authorize.Net , CyberSource is acquiring a
provider of IP-based payment gateway solutions
to manage electronic transactions via Web sites, over the phone, or at retail centers.

CyberSource already provides many of those services, enabling
electronic payment processing for Web, call center, and POS
environments. It also offers professional services to
design, integrate, and optimize commerce transaction processing systems.

“This is an investment in growth and scale,” CyberSource chairman and
CEO Bill McKiernan said in a statement. According to CyberSource,
the companies collectively processed approximately 1.1 billion
transactions in 2006, representing $65 billion of e-commerce.

And that $65 billion was part of a still-growing pool in 2006, which
saw record highs on all the major e-commerce holidays at the
end of the year. Still, some industry watchers are beginning to
wonder if e-commerce growth will slow its pace in the next few years.

Anecdotal evidence of a possible decline in growth is available in
Dell, which used to sell its computers online only. In May,
Dell announced plans to sell PCs through Wal-Mart and Sam’s Club.

But like the confident consumer on which its business depends,
CyberSource went shopping anyway. It said that the transaction,
subject to regulatory requirements and shareholder approval, should
close in late September or early October.

When it does, Robert Donahue, currently a member of the board of
directors of Authorize.Net Holdings, will join the board of
directors of CyberSource. To make room, Scott Cruickshank, president
and COO of CyberSource, has agreed to resign from the board of
directors of CyberSource.

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