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PayPal Shareholders OK Acquisition by EBay

October 04, 2002|DAVID COLKER | TIMES STAFF WRITER

EBay Inc., already the master of the online auction universe, now rules the lucrative fiefdom of online payments as well.

Shareholders of PayPal Inc. voted Thursday to approve a $1.25-billion acquisition that made them part of the EBay empire. In addition to earning tens of millions of dollars annually in fees from hosting online auctions, EBay can expect to pocket millions more by taking a cut of the payments.

The deal, which had not run into any major opposition since it was announced in July, was ratified at a sparsely attended Palo Alto shareholders meeting that lasted less than eight minutes.

"It's a lot to bite off, the largest acquisition EBay has made by a wide margin," said analyst Derek Brown of WR Hambrecht & Co., who owns EBay stock. (His firm does not own EBay shares or do business with the company.) "But it does make a lot of sense for them in the long term."

The vote came while markets were still open. Shares of San Jose-based EBay fell $1.40 to $51.90 in Nasdaq trading.

Within hours, EBay announced that PayPal Chief Executive Peter Thiel had resigned. His duties were assumed by Matt Bannick, head of EBay's global online payments.

PayPal will continue as an independent brand. The payment service's online gambling business will be phased out.

PayPal facilitates online credit card transactions between buyers and sellers. More than 60% of PayPal's business is derived from EBay transactions.

EBay's payment system, Billpoint, was not as popular as PayPal.

"The buyers went to PayPal because that's where the sellers did business, and vice versa," Brown said.

PayPal, which has more than 20 million member accounts, went public in February. In its only quarterly filing in July, the company reported a profit of $529,000, or 1 cent a share. EBay has been profitable every quarter since it went public in September 1998.

This week EBay put on the block its only remaining bricks-and-mortar auction house, automobile specialist Kruse International, which EBay acquired in 1999.

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