is set to acquire VeriSign’s
payment gateway business as part of a
broad strategic alliance between the two companies announced today.
EBay’s PayPal unit will pay approximately $370 million in cash
and/or EBay stock for the VeriSign unit, in a deal that is expected to close
by the end of the year. VeriSign’s payment gateway business, to be merged
with PayPal’s merchant services platform, is expected to provide the combined
unit with an incremental $100 million of revenue at a 20 percent pro forma
operating margin in 2006, the companies said
According to VeriSign, its payment gateway processed over $40 billion in
payments in 2004.
VeriSign’s payment gateway is an Internet-based real-time platform for
online payment authorization and management. PayPal offers its own payment
services, which have been particularly popular with eBay users. EBay acquired PayPal for $1.5 billion in 2002.
In addition to PayPal’s acquisition of VeriSign’s gateway business, EBay
has also agreed to a multi-year security technology agreement that will
see EBay investing in VeriSign’s payment security solutions. Among those
solutions is two-factor authentication, which eBay and PayPal are expected to
roll out to customers in 2006.
“VeriSign’s payment gateway is a popular and market-proven product that
perfectly complements PayPal’s existing payment services,” said Jeff Jordan,
president of PayPal, in a statement. “We’re very excited about the
opportunity to extend the benefits of PayPal’s services to the VeriSign
customer base. This acquisition allows PayPal to give our customers more
choice in payment services and grow our merchant services business even more