Definitive Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
GSI Commerce, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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The following is a letter that was transmitted to all employees of GSI Commerce, Inc. on March 28,
2011:
GSI COMMERCE LETTER TO EMPLOYEES
FINAL
TO BE SENT FROM RUBIN MAILBOX AT 9:05 AM
Subject: eBay to Acquire GSI Commerce
Today is a historic day for GSI Commerce. A news release was just issued announcing that eBay has
agreed to acquire GSI. Please take a few minutes to read this entire email so you can fully
absorb the details around this event.
I feel great about this transaction as does our Board of Directors and senior leadership team. This
acquisition will position our combined businesses as the global leader of next-generation commerce
solutions and provide continued growth opportunities for you. eBay will invest to further
strengthen our products and services, enabling us to best serve our clients. It is truly a
win/win outcome.
Combining GSIs strength of serving leading retailers and brands with eBays global online
marketplaces and payments platforms, as well as their mobile commerce leadership and focus on
innovation will create an unmatched suite of commerce products and services. No one will be in a
better position to be the strategic global commerce partner of choice for retailers of all sizes.
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Over the last few months, I told many of you that we have built a good company: |
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We are a meaningful player in e-commerce |
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We work with many of the worlds leading retailers and brands |
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We have more than 5,000 of the most dedicated and passionate employees
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I am proud of what we have accomplished, yet I firmly believe the market opportunity for global
e-commerce and marketing services is so much bigger. With eBay, we now have the platform to
capture that extraordinary opportunity and become a great company, much more quickly than we could
do on our own. And, with more than 50% of its revenue coming from outside of the U.S., eBay is
the perfect partner for GSI and its clients as we embark on our global expansion.
For eBay, this acquisition is all about growth. eBay currently has two major businesses: eBay
Marketplaces and Paypal. As many of you know, PayPal has become an important partner for GSI and
its clients. Since we have implemented PayPal on many of our client sites, we have enhanced the
consumer experience and improved conversions at checkout. The combination of PayPals more than
94 million active customers and eBays global marketplace business, with almost 95 million active
users generating $60 billion in annual merchandise volume, will help drive even more consumer
demand for GSIs clients and their sites.
2
GSIs e-commerce and marketing services businesses will represent eBays third division and will be
run as a standalone business unit led by Chris Saridakis. Chris joined GSI as CEO of our global
marketing services division about a year ago and it has always been my belief and that of our Board
of Directors that Chris was the right long-term leader of GSIs e-commerce and marketing services
businesses.
Also, as part of this transaction, eBay will be simultaneously selling Rue La La, ShopRunner and
GSIs Licensed Sports Merchandise business, including Fanatics. I have formed a new privately held
company which will be not be part of GSI. This company will be purchasing the consumer businesses
from eBay. Although eBay will not directly own and manage the private company businesses, eBay
will be a minority investor in Rue La La and ShopRunner, retaining a 30% stake in each.
Separating the consumer businesses from the e-commerce and marketing services businesses will get
the best results for all of the GSI companies. By separating the businesses, eBay and GSI can
better focus on growing their product and service offerings. This combined with eBays focus on
aggressively investing in GSI, will further GSIs leadership position and strengthen eBays
offerings without competing with their merchants. GSI can then be solely focused on building the
best e-commerce and marketing products and services globally for our clients.
Looking back, I am very proud of the incredible company that we have built together. I am also
proud of the leadership team we have assembled. I am confident that Chris and his team will
accelerate the growth journey that we began 12 years ago. I want to thank each and every one of
you for making GSI so successful. I look forward to seeing GSI and eBay together taking commerce to
a whole new level by being the strategic global commerce partner of choice.
I encourage you to view this microsite http://changingshopping.ebayinc.com for additional
details related to the announcement. Also, if you should have any questions, feel free to email
them to gsievents@gsicommerce.com.
Shortly youll receive an invitation to join me and Chris, together with eBays CEO John Donahoe
and CFO Bob Swan and PayPal President Scott Thompson, for a meeting later this afternoon. I
encourage you to attend as we will share more about what this means for you and celebrate this
exciting opportunity for GSI.
Congratulations to everyone at GSI. We should be very proud of the business we have built and even
more excited about where we are heading.
Michael
3
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements,
other than
statements of historical facts, are forward-looking statements. These forward looking statements
address, among other things activities, events or developments that we expect, believe or
anticipate will or may occur in the future, including our statements relating to the anticipated
effects of the proposed merger with eBay and its anticipated benefits if consummated. These
forward-looking statements are subject to a number of risks that could cause actual results to
differ materially from those contained in the forward-looking statements, including the risk that
our stockholders may not approve the merger and that the regulatory approvals and any other
required approvals in connection with the merger may not be obtained on the proposed terms or at
the times anticipated, as well as the risk factors described Item 1A of our 2010 Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the SEC).
Currently unknown or unanticipated risks, or risks that emerge in the future, could cause actual
results to differ materially from those described in forward-looking statements, and it is not
possible for us to predict all such risks, or the extent to which this may cause actual results to
differ from those contained in any forward-looking statement. Except as required by law, we assume
no obligation to update publicly any such forward-looking statements, whether as a result of new
information, future events, or otherwise.
Important Merger Information
This communication may be deemed to be solicitation material in respect of the proposed acquisition
of GSI Commerce by eBay. In connection with the proposed acquisition, GSI Commerce intends to file
a proxy statement on Schedule 14A with the Securities and Exchange Commission, or SEC, and GSI
Commerce and eBay intend to file other relevant materials with the SEC. Stockholders of GSI
Commerce are urged to read all relevant documents filed with the SEC when they become available,
including GSI Commerces proxy statement, because they will contain important information about the
proposed transaction. A definitive proxy statement will be sent to holders of GSI Commerce stock
seeking their approval of the proposed transaction. This communication is not a solicitation of a
proxy from any security holder of GSI Commerce.
Investors and security holders will be able to obtain the documents (when available) free of charge
at the SECs web site, http://www.sec.gov. In addition, GSI Commerce stockholders may
obtain free copies of the documents filed with the SEC when available by contacting GSI Commerces
Investor Relations at 610-491-7068.
Such documents are not currently available. You may also read and copy any reports, statements and
other information filed with the SEC at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SECs website for
further information on its public reference room.
GSI Commerce and its directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the holders of GSI Commerce common stock in respect of the proposed
transaction. Information regarding the directors and executive officers of GSI Commerce is
available in the 2010 Annual Report on Form 10-K, filed with the SEC on March 1, 2011, and the
proxy statement for GSI Commerces 2010 Annual Meeting of Stockholders, filed with the SEC on April
13, 2010. Additional information regarding the interests of such potential participants will be
included in the proxy statement and the other relevant documents filed with the SEC when they
become available.
4
The following is a letter that was transmitted to clients of GSI Commerce, Inc. on March 28, 2011:
GSI LETTER TO CLIENTS
FINAL
TO BE SENT FROM RUBIN MAILBOX AT 9:05 AM
Today is a historic day for GSI Commerce. A news release was just issued announcing that eBay
plans to acquire GSI.
As you know, eBay Inc. is an Internet pioneer and is today one of the worlds preeminent e-commerce
and online payments companies. eBay has more than 94 million buyers and sellers worldwide and
generated $62 billion in merchandise volume in 2010. PayPal is the leading online payments company
with more than 94 million active registered accounts that generated $92 billion in payment volume
last year. The acquisition of GSI will create a third, standalone business unit of eBay and mark
their entry into providing e-commerce and interactive marketing services to enterprise clients.
We clearly see that the distinctions between online and offline commerce are disappearing.
Technology is changing how people shop and how retailers and brands must compete. Today, retailers
and brands need a partner that can enable multichannel distribution, create demand and drive
shopping innovation.
We believe that combining GSIs strength of serving leading retailers and brands with eBay
Marketplace and PayPal businesses, as well as their mobile commerce leadership and focus on
innovation, will create an unmatched suite of products and services for retailers and brands. With
more than 50% of its revenue coming from outside of the U.S., we believe eBay is a perfect fit for
GSI and its clients. eBay and GSI are well positioned to be your strategic global commerce partner
of choiceenabling, not competing.
After the transaction closes, GSIs e-commerce and marketing services businesses will be joining
the eBay family and will be led by Chris Saridakis. Chris joined GSI as CEO of our global
marketing services division about a year ago and has done an amazing job of developing and
enhancing these businesses. Myself and our Board of Directors view Chris as the ideal person to
lead GSIs e-commerce and marketing services businesses based on his track record of success and
his passion to drive growth for our clients. Chris is surrounded by an incredible leadership team
and your GSI account teams will continue to remain fully focused on supporting you.
Also after the transaction closes, eBay will be selling 70% of Rue La La and ShopRunner and 100% of
GSIs Licensed Sports Merchandise business including Fanatics, to a new privately held company that
I formed. This will allow eBay and GSI to better focus on e-commerce and marketing services
businesses and maximize the benefit to clients from the combination of the companies. This along
with eBays ability to invest in GSIs products and services will allow GSI to focus on best
meeting your
needs. Between now and closing, I will work closely with Chris and upon closing of the transaction,
Chris will report directly to eBay CEO John Donahoe.
5
GSI and eBay intend to lead the next generation of commerce helping retailers compete globally
and helping consumers shop for whatever they want, anytime and anywhere. While this represents a
significant milestone for eBay and GSI, it becomes an even more important opportunity for you. I
believe by strategically aligning eBays deep expertise in global, mobile and local commerce, you
will be able to accelerate the growth of your business. Please feel free to contact me, Chris or
Scott Hardy about these opportunities.
I am confident that GSI and all of its businesses are more focused than ever on supporting your
needs.
Michael Rubin Chris Saridakis
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, are forward-looking statements. These forward looking
statements address, among other things activities, events or developments that we expect, believe
or anticipate will or may occur in the future, including our statements relating to the anticipated
effects of the proposed merger with Ernie and its anticipated benefits if consummated. These
forward-looking statements are subject to a number of risks that could cause actual results to
differ materially from those contained in the forward-looking statements, including the risk that
our stockholders may not approve the merger and that the regulatory approvals and any other
required approvals in connection with the merger may not be obtained on the proposed terms or at
the times anticipated, as well as the risk factors described Item 1A of our 2010 Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the SEC).
Currently unknown or unanticipated risks, or risks that emerge in the future, could cause actual
results to differ materially from those described in forward-looking statements, and it is not
possible for us to predict all such risks, or the extent to which this may cause actual results to
differ from those contained in any forward-looking statement. Except as required by law, we assume
no obligation to update publicly any such forward-looking statements, whether as a result of new
information, future events, or otherwise.
Important Merger Information
This communication may be deemed to be solicitation material in respect of the proposed acquisition
of GSI Commerce by eBay. In connection with the proposed acquisition, GSI Commerce intends to file
a proxy statement on Schedule 14A with the Securities and Exchange Commission, or SEC, and GSI
Commerce and eBay intend to file other relevant materials with the SEC. Stockholders of GSI
Commerce are urged to read all relevant documents filed with the SEC when they become available,
including GSI Commerces proxy statement, because they will contain important information about the
proposed transaction. A definitive proxy statement will be sent to holders of GSI Commerce stock
seeking their approval of the proposed transaction. This communication is not a solicitation of a
proxy from any security holder of GSI Commerce.
Investors and security holders will be able to obtain the documents (when available) free of charge
at the SECs web site, http://www.sec.gov. In addition, GSI Commerce stockholders may obtain free
copies of the documents filed with the SEC when available by contacting GSI Commerces Investor
Relations at 610-491-7068.
6
Such documents are not currently available. You may also read and copy any reports, statements and
other information filed with the SEC at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 or visit the SECs website for further information on its
public reference room.
GSI Commerce and its directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the holders of GSI Commerce common stock in respect of the proposed
transaction. Information regarding the directors and executive officers of GSI Commerce is
available in the 2010 Annual Report on Form 10-K, filed with the SEC on March 1, 2011, and the
proxy statement for GSI Commerces 2010 Annual Meeting of Stockholders, filed with the SEC on April
13, 2010. Additional information regarding the interests of such potential participants will be
included in the proxy statement and the other relevant documents filed with the SEC when they
become available.
7
The following is an acquisition FAQ communication that was transmitted to employees of GSI
Commerce, Inc. on March 28, 2011:
Acquisition FAQ for Employees
March 28, 2011
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10 |
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11 |
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Overview/General Questions
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1. Who is eBay? What do they do?
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Founded in 1995 in San
Jose, Calif., eBay Inc.
connects millions of
buyers and sellers
globally on a daily
basis through eBay, the
worlds largest online
marketplace, and PayPal,
which enables
individuals and
businesses to securely,
easily and quickly send
and receive online
payments. The company
also reaches millions
through specialized
marketplaces such as
StubHub, the worlds
largest ticket
marketplace, and eBay
Classifieds sites, which
together have a presence
in more than 1,000
cities around the world. |
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2. Why did eBay enter into an agreement to acquire
GSI? What is eBays vision for GSI?
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With their complementary
capabilities, GSI
Commerce and eBay
together will offer an
unmatched suite of
global commerce
services. This powerful
platform will drive
shopping innovation and
new ways for retailers
and brands to engage
customers and help
people shop anytime,
anywhere and on any
device.
This transaction will
introduce more than 180
GSI Commerce customers
to eBays marketplace
channel, and PayPal and
BillMeLater will benefit
from the opportunity to
increase penetration
with GSIs customers
online and off-line.
GSIs technology
platform will benefit
from leveraging eBays
resources and
innovation, augmented by
a suite of eBays
technologies such as
Milo and RedLaser. |
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3. Why did GSI decide to enter into an agreement
to become part of eBay?
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The lines between online
and offline commerce are
blurring as advances in
mobile, local, social,
digital media technology
are changing how people
shop ... and how
retailers and brands
must serve them. GSIs
clients need a partner
that can enable
multichannel
distribution, create
demand, and drive
shopping innovation by
capitalizing on these
emerging trends.
By becoming part of
eBay, GSI believes it
would be better
positioned to support
clients as they compete
in this ever-changing
environment. After the
transaction closes, we
believe that combining
GSIs leading e-commerce
and interactive
marketing services with
eBays global online
marketplaces and
payments platforms
expertise together with
their mobile commerce
leadership and focus on
innovation will position
us to be the strategic
commerce partner of
choice for retailers of
all sizes. We believe
that all of this will
help GSI capture a
bigger share of this
significant market
opportunity. |
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4. How will GSI operate under eBay?
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GSI Commerce will
operate as its own
business unit, similar
to Marketplaces and
Payments. The business
unit will be led by
Chris Saridakis, who
will report into John
Donahoe. |
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5. A few weeks ago, Michael said he wanted to take
the company from being good to great. How does
being part of eBay help GSI go from good to great?
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We believe that eBay
accelerates our strategy
to go from good to
great. In just 12
years we have built a
very good company. We
are fortunate to do
business with
prestigious clients who
have helped us become a
meaningful player in
e-commerce and marketing
services.
We outlined a strategy
to help us get from good
to great. Our strategy
remains unchanged: |
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deliver best-of-breed
products and services in
order to drive top-line
growth for clients and
GSI.
We believe that eBay
will help us become a
great company faster
than we would have done
on our own. We believe
that becoming part of
the eBay organization
will provide us with
greater access to the
resources that we need
to execute on our
strategy and expand our
reach globally. |
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6. GSI is in the process of organizing our
products and services to run like a business. Are
we moving forward with that strategy?
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Yes. GSI will continue
with its strategy of
operating highly
competitive market
leading businesses. We
will constantly evaluate
to ensure that we have
the right structures in
place to best serve our
clients and the market. |
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7. What is the purchase price of the acquisition?
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eBay will acquire GSI
for $29.25 a share or
for total consideration
of $2.4 billion. |
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8. When does the acquisition officially close?
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The transaction is
subject to customary
closing conditions
including regulatory
approvals, as well as
the approval of
shareholders. We expect
the transaction to close
in the third quarter of
2011. |
9
The Acquisition
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1. Will there be any other staffing changes at
GSI? Will GSI lay off any employees?
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Integration planning
between eBay and GSI
will begin soon.
However, until the
acquisition closes the
two companies will
continue to operate
separately. When the
transaction closes, we
will be in a better
position to share
information on the
impact, if any, on jobs
and people. |
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2. What will be the names of the companies
following the close of the acquisition?
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eBay has significant
brand equity around the
world. As part of the
integration planning
process we will evaluate
how to best position and
brand GSI going forward. |
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3. Who is leading GSI? Why was this decision made?
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Effective upon closing
of the acquisition,
Chris Saridakis will
lead GSIs e-commerce
and global marketing
services businesses.
Chris joined the company
about a year ago and has
done an extraordinary
job of developing and
enhancing our global
marketing services
business. |
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4. After the transaction closes, eBay has agreed
to sell the consumer-facing businesses: Rue La La,
ShopRunner and Licensed Sports Merchandise
businesses (TeamStore/Fanatics) to Michael Rubin.
Why?
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eBay is a big believer
in GSIs consumer-facing
businesses and will
maintain a financial
interest in the success
of two of these
businesses, Rue La La
and ShopRunner. However,
these consumer-facing
businesses are not core
to eBays long-term
growth strategy. |
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5. Why will Michael Rubin be stepping down after
closing to lead the consumer-facing businesses?
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Michael Rubin has formed
a new privately held
company which will
purchase Rue La La,
ShopRunner and GSIs
Licensed Sports
Merchandises business
(including Fanatics)
from eBay after the
closing of the
acquisition of GSI by
eBay. This will allow
him to focus on growing
these businesses.
And as we all know,
Michael is an
entrepreneur at heart
and is very passionate
about launching and
growing new businesses.
The new consumer-facing
company will enable him
to focus 100% of his
time and energy on
helping to scale and
build these new
businesses. |
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6. Do you expect that a lot of GSI offices to will
relocated? Will any new offices open or merge with
eBay offices?
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No. We have no plans to
relocate any offices in
the foreseeable future.
GSIs corporate
headquarters will remain
in King of Prussia, PA. |
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7. What if someone other than a client, perhaps
someone from the media, an analyst firm, or
potentially competitors or investors, calls and
starts asking me questions about this event. What
should I say?
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Media inquiries should
be referred to Kelly
Henry, Director, GSI
Corporate Marketing
(henryke@gsicommerce.com
610.491.7474). If you
arent sure who is
calling, take their name
and number, refer them
to the press release on
our site, and send
contact details to Kelly
Henry.
Refer ALL
investor/financial
analyst inquiries to
Steve Somers, GSI
Director, Investor
Relations
(ir@gsicommerce.com or
610.491.7068). If you
arent sure who is
calling, take their name
and number, refer them
to the press release on
the GSI website, and
send contact details to
Steve Somers. |
10
Whats Next for GSI Employees and Clients?
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1. When and how will the integration take place?
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Both companies will operate independently and
integration activities will not begin until the deal is
closed which is anticipated to occur in the second half
of 2011. Until then, it is important to understand that
it will be business as usual for both GSI and eBay. |
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2. Will eBay be able to help GSI expand globally?
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Yes. With more than 50% of its revenue coming from
outside of the U.S., eBay is the perfect partner for
GSI and its clients as we embark on our global
expansion. eBay and GSI believe that the acquisition
will enable eBay to leverage its global footprint to
accelerate GSIs international market expansion. |
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3. Will GSI still provide services for clients of
Rue La La, ShopRunner and Licensed Sports
Merchandise businesses (TeamStore/Fanatics)?
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GSI will continue to provide technology, call center
and marketing services for Rue La La, ShopRunner and
Licensed Sports Merchandise businesses
(TeamStore/Fanatics) and its clients. As part of the
sale of the consumer-facing businesses to Michael, one
of GSIs Shepherdsvilles facilities will also be sold
to the new privately held company led by Michael Rubin. |
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4. Will GSIs benefits change? Health plan, 401K,
etc. If yes, when will these changes take place?
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For now both companies will run independently. Over
the next few months eBay and GSI will evaluate how best
to proved GSI employees benefits. |
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5. Does eBay have any fulfillment or call center
capabilities?
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eBay has call centers around the world including major
operations in Salt Lake City, UT; Omaha, NE and Dublin,
Ireland. |
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6. Will my pay change?
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There are no plans to make any changes to compensation
at this time. |
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7. Will there be employment opportunities for GSI
employees at eBay?
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Yes. Employees from both companies will be free to
explore employment opportunities with the other. We
believe there will be more openings once GSI becomes
part of eBay. |
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8. What is the communications plan to GSIs clients?
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An email from Michael Rubin was sent to all GSI clients. |
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9. Will this change the v11 launch and rollout
plans?
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No were excited and looking forward to a successful
v11 launch and rollout is critical to our success. We
will maintain the current development path we are on
today. |
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10. Is there somewhere I can get more information
about the acquisition?
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You can link to a website for all of the information
related to this announcement at
http://changingshopping.ebayinc.com
If you have any questions about this deal, please email
them to gsievents@gsicommerce.com |
11
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, are forward-looking statements. These forward looking
statements address, among other things activities, events or
developments that we expect, believe or anticipate will or may occur in the future, including our
statements relating to the anticipated effects of the proposed merger with eBay and its anticipated
benefits if consummated. These forward-looking statements are subject to a number of risks that
could cause actual results to differ materially from those contained in the forward-looking
statements, including the risk that our stockholders may not approve the merger and that the
regulatory approvals and any other required approvals in connection with the merger may not be
obtained on the proposed terms or at the times anticipated, as well as the risk factors described
Item 1A of our 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission
(the SEC).
Currently unknown or unanticipated risks, or risks that emerge in the future, could cause actual
results to differ materially from those described in forward-looking statements, and it is not
possible for us to predict all such risks, or the extent to which this may cause actual results to
differ from those contained in any forward-looking statement. Except as required by law, we assume
no obligation to update publicly any such forward-looking statements, whether as a result of new
information, future events, or otherwise.
Important Merger Information
This communication may be deemed to be solicitation material in respect of the proposed acquisition
of GSI Commerce by eBay. In connection with the proposed acquisition, GSI Commerce intends to file
a proxy statement on Schedule 14A with the Securities and Exchange Commission, or SEC, and GSI
Commerce and eBay intend to file other relevant materials with the SEC. Stockholders of GSI
Commerce are urged to read all relevant documents filed with the SEC when they become available,
including GSI Commerces proxy statement, because they will contain important information about the
proposed transaction. A definitive proxy statement will be sent to holders of GSI Commerce stock
seeking their approval of the proposed transaction. This communication is not a solicitation of a
proxy from any security holder of GSI Commerce.
Investors and security holders will be able to obtain the documents (when available) free of charge
at the SECs web site, http://www.sec.gov. In addition, GSI Commerce stockholders may
obtain free copies of the documents filed with the SEC when available by contacting GSI Commerces
Investor Relations at 610-491-7068.
Such documents are not currently available. You may also read and copy any reports, statements and
other information filed with the SEC at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SECs website for
further information on its public reference room.
GSI Commerce and its directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the holders of GSI Commerce common stock in respect of the proposed
transaction. Information regarding the directors and executive officers of GSI Commerce is
available in the 2010 Annual Report on Form 10-K, filed with the SEC on March 1, 2011, and the
proxy statement for GSI Commerces 2010 Annual Meeting of Stockholders, filed with the SEC on April
13, 2010. Additional information regarding the interests of such potential participants will be
included in the proxy statement and the other relevant documents filed with the SEC when they
become available.
12
The following is deal factsheet that was transmitted on March 28, 2011:
eBay Inc. Agrees to Acquire GSI Commerce
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Headquarters
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San Jose, CA
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King of Prussia, PA
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Employees
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17,700 |
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5,200 |
Customers
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Approx.190 million active
users and accounts across
Marketplaces and PayPal
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180 retailers and brands
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2010 Revenue
Business Units
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$9.16 billion
Payments, Marketplaces
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$1.36 billion
eCommerce, Marketing
Services and Consumer
Engagement
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Transaction
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On March 27, 2011, eBay Inc. and GSI
Commerce entered into a definitive
agreement in which eBay agreed to acquire
GSI for $29.25 per share, or total
consideration of approximately $2.4
billion. As part of the transaction, eBay
will divest 100 percent of GSIs licensed
sports merchandise businesses and 70
percent of GSIs Rue La La and ShopRunner
businesses to a newly formed holding
company, which will be led by GSI founder
and CEO Michael Rubin. |
Strategic Rationale
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Retailers today need a partner that can enable multichannel distribution, create demand
and drive shopping innovation through trends such as mobile, local, social and digital.
EBay and GSI have complementary capabilities, creating an unmatched suite of global
commerce services and opportunities. Combined with eBay and PayPal, we believe that GSI
will enhance the companys position as the strategic global commerce partner of choice for
retailers of all sizes. |
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GSI has relationships with more than 180 customers across 14 merchandise categories,
which includes leading retailers and consumer brands such as fashion icons like Adidas,
Calvin Klein, Betsey Johnson, and Nautica and major retail chains like Toys R Us, Dicks
Sporting Goods, Bath & Body Works, and Restoration Hardware. |
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PayPal and BillMeLater will benefit from opportunity to increase penetration with GSIs
customers. |
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The combined business intends to lead the creation of next-generation shopping
experiences for consumers, helping them to shop anytime, anywhere and on any device. |
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GSIs technology platform will benefit from leveraging eBays resources and innovation,
augmented by a suite of eBay technologies such as Milo and RedLaser. |
Transaction Terms
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eBay to acquire GSI for approximately $2.4 billion. |
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eBay will to divest 100 percent of GSIs sports licensing businesses and 70 percent of
Rue La La and ShopRunner to a newly formed holding company, which will be led by GSI
founder and CEO, Michael Rubin. |
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GSI will be operated as a third business unit, to be led by Chris Saridakis. |
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GSI shareholders to receive $29.25 per share in cash. |
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The transaction will be financed with cash and debt, and is expected to close in the
third quarter, subject to regulatory approvals and other customary closing conditions. |
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Contacts |
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eBay Inc. |
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press@ebay.com
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GSI Commerce |
+1-408-376-7493
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http://www.gsicommerce.com/investors |
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, are forward-looking statements. These forward looking
statements address, among other things activities, events or developments that we expect, believe
or anticipate will or may occur in the future, including our statements relating to the anticipated
effects of the proposed merger with eBay and its anticipated benefits if consummated. These
forward-looking statements are subject to a number of risks that could cause actual results to
differ materially from those contained in the forward-looking statements, including the risk that
our stockholders may not approve the merger and that the regulatory approvals and any other
required approvals in connection with the merger may not be obtained on the proposed terms or at
the times anticipated, as well as the risk factors described Item 1A of our 2010 Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the SEC).
Currently unknown or unanticipated risks, or risks that emerge in the future, could cause actual
results to differ materially from those described in forward-looking statements, and it is not
possible for us to predict all such risks, or the extent to which this may cause actual results to
differ from those contained in any forward-looking statement. Except as required by law, we assume
no obligation to update publicly any such forward-looking statements, whether as a result of new
information, future events, or otherwise.
Important Merger Information
This communication may be deemed to be solicitation material in respect of the proposed acquisition
of GSI Commerce by eBay. In connection with the proposed acquisition, GSI Commerce intends to file
a proxy statement on Schedule 14A with the Securities and Exchange Commission, or SEC, and GSI
Commerce and eBay intend to file other relevant materials with the SEC. Stockholders of GSI
Commerce are urged to read all relevant documents filed with the SEC when they become available,
including GSI Commerces proxy statement, because they will contain important information about the
proposed transaction. A definitive proxy statement will be sent to holders of GSI Commerce stock
seeking their approval of the proposed transaction. This communication is not a solicitation of a
proxy from any security holder of GSI Commerce.
Investors and security holders will be able to obtain the documents (when available) free of charge
at the SECs web site, http://www.sec.gov. In addition, GSI Commerce stockholders may
obtain free copies of the documents filed with the SEC when available by contacting GSI Commerces
Investor Relations at 610-491-7068.
Such documents are not currently available. You may also read and copy any reports, statements and
other information filed with the SEC at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SECs website for
further information on its public reference room.
GSI Commerce and its directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the holders of GSI Commerce common stock in respect of the proposed
transaction. Information regarding the directors and executive officers of GSI Commerce is
available in the 2010 Annual Report on Form 10-K, filed with the SEC on March 1, 2011, and the
proxy statement for GSI Commerces 2010 Annual Meeting of Stockholders, filed with the SEC on April
13, 2010. Additional information regarding the interests of such potential participants will be
included in the proxy statement and the other relevant documents filed with the SEC when they
become available.
The following is an acquisition FAQ communication that was transmitted on March 28, 2011:
FAQ
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1. |
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Why is eBay acquiring GSI Commerce? |
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2. |
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What are the terms of the transaction |
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3. |
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Who is GSI Commerce? |
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4. |
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How does GSI Commerce complement eBays portfolio and platform? |
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5. |
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What synergies do you anticipate from eBays acquisition of GSI Commerce |
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6. |
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How will GSI Commerce operate as part of eBay? |
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7. |
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What role will GSIs senior management team play in the combined company? |
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8. |
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Why are Rue La La, ShopRunner and Fanatics being divested? |
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9. |
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What impact will this transaction have on eBays guidance? |
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10. |
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When is the transaction expected to close? |
Why is eBay acquiring GSI Commerce?
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Combined with eBay and PayPal, we believe GSI Commerce will enhance our position as the
strategic global commerce partner of choice for retailers of all sizes. |
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With their complementary capabilities, GSI Commerce and eBay together will offer an
unmatched suite of global commerce services. This powerful platform will drive shopping
innovation and new ways for retailers to engage customers and help people shop anytime,
anywhere and on any device. |
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This transaction will introduce more than 180 GSI Commerce customers to eBays
marketplace channel, and PayPal and BillMeLater will benefit from the opportunity to
increase penetration with GSIs customers online and off-line. |
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GSIs technology platform will benefit from leveraging eBays resources and innovation,
augmented by a suite of eBays technologies such as Milo and RedLaser. |
What are the terms of the transaction?
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eBay will acquire GSI Commerce for $29.25 per share, or total consideration of
approximately $2.4B, financed with cash and debt. |
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The transaction is expected to close in the third quarter. |
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Simultaneously with closing, we expect to sell stakes in two businesses and the entirety
of a third business, which are not core to our long-term strategy, to an entity formed by
GSIs current CEO, Michael Rubin. |
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eBay will sell stakes in three businesses to the newly created Holding Company |
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100% of combined sports licensing business (Fanatics and Licensed Sports Merchandise) |
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70% of Rue La La and 70% of ShopRunner |
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eBay will loan the holding company $467M. Michael Rubin will invest additional cash of
$31 million in the holding company.. |
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Following the divestiture, eBay will own 30% of Rue La La and 30% of ShopRunner |
Who is GSI Commerce?
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GSI Commerce is a leading provider of online commerce solutions and interactive
marketing services for retailers and is the only company that enables all aspects of online
commerce for retailers and brands. |
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With more than 180 customers across 14 merchandise categories, GSI Commerce has strong
relationships with leading retailers and consumer brands from fashion icons like Adidas,
Levis, Calvin Klein, Betsey Johnson, Kenneth Cole, Kate Spade, Nautica and Timberland; to
major retail chains like Toys R Us, Dicks Sporting Goods, Radio Shack, GNC, Bath & Body
Works, Restoration Hardware, and Cost Plus World Market. |
How does GSI Commerce complement eBays portfolio and platform?
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Combined with eBay and PayPal, we believe GSI Commerce will enhance our position as the
strategic global commerce partner of choice for retailers of all sizes. |
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With their complementary capabilities, GSI Commerce and eBay together will offer an
unmatched suite of global commerce services. This powerful platform will drive shopping
innovation and new ways for retailers to engage customers and help people shop anytime,
anywhere and on any device. |
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This transaction will introduce more than 180 GSI Commerce customers to eBays
marketplace channel, and PayPal and BillMeLater will benefit from the opportunity to
increase penetration across GSIs customers. |
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GSIs technology platform will benefit from leveraging eBays resources and innovation,
augmented by a suite of eBay technologies such as Milo and RedLaser. |
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What synergies do you anticipate from eBays acquisition of GSI Commerce? |
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Expand our platform capabilities |
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Global expansion opportunities |
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Improved multi-channel capabilities (local and mobile) |
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Expand large merchant presence on eBay platform |
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Expand the reach of our payment solutions on GSI Commerce, online and off-line |
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Integration of GSIs corporate structure into eBay to eliminate
overlapping functions and create process and payment processing costs |
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Reduced G&A, technology spend and processing costs |
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We anticipate synergies growing to approximately $60M in 2013. |
How will GSI Commerce operate as part of eBay?
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GSI Commerce will operate as its own business unit, similar to Marketplaces and
Payments. |
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The business unit will be led by Chris Saridakis, who will report into John Donahoe. |
What role will GSIs senior management team play in the combined company?
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Michael Rubin, the founder and current CEO of GSI Commerce, will be leaving GSI Commerce
upon the close of the transaction. The remainder of the GSI Commerce senior management team
remains committed to the business. |
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Chris Saridakis will become the new president of GSI Commerce. |
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Chris joined GSI from Gannett Co., Inc., a leading news and information
service, where he served as senior vice president and chief digital officer since
2008 and head of Gannett Marketing Services. Prior to Gannett, he was CEO of
PointRoll, and helped build the company into the leader in rich media, serving the
worlds top creative and media ad agencies. He has also served as senior vice
president and general manager of DoubleClicks Global TechSolution division. |
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Michael Rubin will lead a new holding company that will hold stakes in three businesses
that are being divested by eBay simultaneously as part of this transaction. |
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eBay will sell stakes in three businesses to the newly created Holding Company. |
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100% of combined sports licensing business (Fanatics and Licensed Sports Merchandise) |
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70% of Rue La La and 70% of ShopRunner |
Why are Rue La La, ShopRunner and Fanatics being divested?
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eBay believes these businesses are not core to eBays long-term growth strategy. |
What impact will this transaction have on eBays guidance?
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Addressing short-term outlook, we will provide Q2 guidance on our Q1 earnings call in
April. |
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Looking ahead, assuming the closing of the proposed transaction and the planned
divestitures, we expect our 2013 revenue forecast to increase to $14.1 $16.3B |
When is the transaction expected to close?
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The transaction is subject to customary closing conditions including regulatory
approvals as well as the approval of GSI shareholders. |
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We expect the transaction to close in the third quarter of 2011. |
eBay Inc. Forward-Looking Statements
This document contains forward-looking statements relating to, among other things, the future
performance of eBay and its consolidated subsidiaries that are based on the companys current
expectations, forecasts and assumptions and involve risks and uncertainties. These statements
include, but are not limited to, statements regarding eBay and GSI Commerce and the expected impact
of the transaction on eBays expected financial results for full year 2011. The companys actual
results could differ materially from those predicted or implied and reported results should not be
considered as an indication of future performance. Factors that could cause or contribute to such
differences include, but are not limited to: the receipt and timing of regulatory approval for the
transaction, the possibility that the transaction may not close, and the reaction of consumers and
GSI Commerces customers; the future growth of GSI Commerce; the reaction of competitors to the
transaction; the possibility that integration following the transaction may be more difficult than
expected; the companys need and ability to manage regulatory, tax, IP and litigation risks
(including risks related to the transaction itself) as its services are offered in more
jurisdictions and applicable laws become more restrictive; the after effects of the global economic
downturn, changes in political, business and economic conditions, including any conditions that
affect ecommerce growth; fluctuations in foreign currency exchange rates; the companys ability to
profitably integrate, manage and grow businesses that have been acquired recently or may be
acquired in the future; the companys need to increasingly achieve growth from its existing users,
particularly in its more established markets; the companys ability to deal with the increasingly
competitive ecommerce environment, including competition for its sellers
from other trading sites
and other means of selling, and competition for its buyers from other merchants, online and
offline; the companys need to manage an increasingly large enterprise with a broad range of
businesses of varying degrees of maturity and in many different geographies; the effect of
management changes and business initiatives; any changes the company may make to its product
offerings; the competitive, regulatory, credit card association-related and other risks specific to
PayPal and Bill Me Later, especially as PayPal continues to expand geographically and grow its open
platform initiative and as new laws and regulations related to financial services companies come
into effect; the companys ability to upgrade and develop its systems, infrastructure and customer
service capabilities at reasonable cost; and the companys ability to maintain site stability and
performance on all of its sites while adding new products and features in a timely fashion.
The forward-looking statements included in this document do not include the potential impact of any
acquisitions or divestitures that may be announced and/or completed after the date hereof.
More information about factors that could affect the companys operating results is included under
the captions Risk Factors and Managements Discussion and Analysis of Financial Condition and
Results of Operations in the companys most recent annual report on Form 10-K and subsequent
quarterly reports on Form 10-Q, copies of which may be obtained by visiting the companys Investor
Relations web site at http://investor.ebayinc.com or the SECs web site at
www.sec.gov. Undue reliance should not be placed on the forward-looking statements included
in this document, which are based on information available to the company on the date hereof. eBay
assumes no obligation to update such statements.
Important Merger Information
This communication may be deemed to be solicitation material in respect of the proposed acquisition
of GSI Commerce by eBay. In connection with the proposed acquisition, GSI Commerce intends to file
a proxy statement on Schedule 14A with the Securities and Exchange Commission, or SEC, and GSI
Commerce and eBay intend to file other relevant materials with the SEC. Stockholders of GSI
Commerce are urged to read all relevant documents filed with the SEC when they become available,
including GSI Commerces proxy statement, because they will contain important information about the
proposed transaction. A definitive proxy statement will be sent to holders of GSI Commerce stock
seeking their approval of the proposed transaction. This communication is not a solicitation of a
proxy from any security holder of GSI Commerce.
Investors and security holders will be able to obtain the documents (when available) free of charge
at the SECs web site, http://www.sec.gov. In addition, GSI Commerce stockholders may
obtain free copies of the documents filed with the SEC when available by contacting GSI Commerces
Investor Relations at 610-491-7068.
Such documents are not currently available. You may also read and copy any reports, statements and
other information filed with the SEC at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SECs website for
further information on its public reference room.
GSI Commerce and its directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the holders of GSI Commerce common stock in respect of the proposed
transaction. Information regarding the directors and executive officers of GSI Commerce is
available in the 2010 Annual Report on Form 10-K, filed with the SEC on March 1, 2011, and the
proxy statement for GSI Commerces 2010 Annual Meeting of Stockholders, filed with the SEC on April
13, 2010. Additional information regarding the interests of such potential participants will be
included in the proxy statement and the other relevant documents filed with the SEC when they
become available.
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, are forward-looking statements. These forward looking
statements address, among other things activities, events or developments that we expect, believe
or anticipate will or may occur in the future, including our statements relating to the anticipated
effects of the proposed merger with eBay and its anticipated benefits if consummated. These
forward-looking statements are subject to a number of risks that could cause actual results to
differ materially from those contained in the forward-looking statements, including the risk that
our stockholders may not approve the merger and that the regulatory approvals and any other
required approvals in connection with the merger may not be obtained on the proposed terms or at
the times anticipated, as well as the risk factors described Item 1A of our 2010 Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the SEC).
Currently unknown or unanticipated risks, or risks that emerge in the future, could cause actual
results to differ materially from those described in forward-looking statements, and it is not
possible for us to predict all such risks, or the extent to which this may cause actual results to
differ from those contained in any forward-looking statement. Except as required by law, we assume
no obligation to update publicly any such forward-looking statements, whether as a result of new
information, future events, or otherwise.
Important Merger Information
This communication may be deemed to be solicitation material in respect of the proposed acquisition
of GSI Commerce by eBay. In connection with the proposed acquisition, GSI Commerce intends to file
a proxy statement on Schedule 14A with the Securities and Exchange Commission, or SEC, and GSI
Commerce and eBay intend to file other relevant materials with the SEC. Stockholders of GSI
Commerce are urged to read all relevant documents filed with the SEC when they become available,
including GSI Commerces proxy statement, because they will contain important information about the
proposed transaction. A definitive proxy statement will be sent to holders of GSI Commerce stock
seeking their approval of the proposed transaction. This communication is not a solicitation of a
proxy from any security holder of GSI Commerce.
Investors and security holders will be able to obtain the documents (when available) free of charge
at the SECs web site, http://www.sec.gov. In addition, GSI Commerce stockholders may
obtain free copies of the documents filed with the SEC when available by contacting GSI Commerces
Investor Relations at 610-491-7068.
Such documents are not currently available. You may also read and copy any reports, statements and
other information filed with the SEC at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SECs website for
further information on its public reference room.
GSI Commerce and its directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the holders of GSI Commerce common stock in respect of the proposed
transaction. Information regarding the directors and executive officers of GSI Commerce is
available in the 2010 Annual Report on Form 10-K, filed with the SEC on March 1, 2011, and the
proxy statement for GSI Commerces 2010 Annual Meeting of Stockholders, filed with the SEC on April
13, 2010. Additional information regarding the interests of such potential participants will be
included in the proxy statement and the other relevant documents filed with the SEC when they
become available.
The following is a transcript of an investor conference call that took place on March 28,
2011:
Conference Call Transcript
EBAY eBay Inc Conference Call to Discuss Acquisition of GSI Commerce
Event Date/Time: Mar 28, 2011 / 03:00PM GMT |
CORPORATE PARTICIPANTS
Jennifer Ceran
eBay Inc. VP, IR
John Donahoe
eBay Inc. CEO
Chris Saridakis
GSI Commerce CEO, Marketing Service Division
Bob Swan
eBay Inc. CFO
Michael Rubin
GSI Commerce CEO
CONFERENCE CALL PARTICIPANTS
Sandeep Aggarwal
Caris & Company Analyst
Scott Devitt
Morgan Stanley Analyst
Rohit Kulkarni
Citigroup Analyst
Spencer Wang
Credit Suisse Analyst
James Mitchell
Goldman Sachs Analyst
Paul Beaver
BAS-ML Analyst
Youssef Squali
Jefferies & Company Analyst
Colin Gillis
BGC Financial Analyst
Colin Sebastian
Lazard Capital Markets Analyst
PRESENTATION
Operator
Good day, ladies and gentlemen, and thank you for standing by. Welcome to the eBay investor
call.
At this time, all participants are in a listen-only mode. Later, we will conduct a
question-and-answer session, and instructions will follow at that time. (Operator Instructions)
As a reminder, this conference is being recorded. I would now like to introduce our first speaker
for today, Miss Jennifer Ceran, Vice President of Investor Relations. Maam, please go ahead.
Jennifer Ceran eBay Inc. VP, IR
Thank you.
Good morning, and thank you for joining us on such short notice, and welcome to our conference call
relating to the announcement that we made earlier this morning.
Joining me today on the call are John Donahoe, our Chief Executive Officer; and Bob Swan, our Chief
Financial Officer; as well as Chris Saridakis, CEO of GSI Commerces Marketing Service Division.
We are providing a slide presentation to accompany the commentary during the call. This conference
call is also being broadcast on the Internet, and both the presentation and call are available
through the Investor Relations section of the eBay website, at investor.eBayinc.com.
Before we begin, Id like to remind you that during the course of this conference call, we will
discuss some non-GAAP measures in talking about our Companys performance. You can find the
reconciliation of those measures to the nearest comparable GAAP measures in the slide presentation
accompanying this conference call.
This announcement contains forward-looking statements relating to eBays future performance that
are based on its current expectations, forecasts and assumptions.
Those statements involve risks and uncertainties, and actual results may differ materially from
those discussed. These statements include, but are not limited to, statements regarding eBay and
GSI and the expected impact of the transaction on eBays expected financial results for full-year
2011, and eBays projected financial outlook.
Factors that could cause or contribute to such differences include, but are not limited to, the
receipt and timing of regulatory approval for the transaction, the possibility that the transaction
may not close, the reaction of consumers and GSIs customers, the future growth of GSI, the
reaction of competitors to the transaction, the possibility that integration following the
transaction may be more difficult than expected; our need to manage regulatory, tax, IP and
litigation risks; including risks specific to PayPal, Bill Me Later, and the financial industry, as
well as those risks relating to the transaction itself.
The aftereffects of the global economic downturn; changes in political, business and economic
conditions; the impact and integration of recent and future acquisitions; our increasing need to
grow revenues from existing users in established markets; increasingly competitive environment for
our businesses; the complexity of managing an increasingly large enterprise with a broad range of
businesses; and our need to upgrade our technology and customer service infrastructure at
reasonable cost while adding new features and maintaining site stability.
You can find more information about factors that could affect our operating results in our most
recent Annual Report on our Form 10-K and our subsequent quarterly reports on Form 10-Q, available
at investor.eBayinc.com.
You should not rely on any forward-looking statements. All information in this presentation is as
of March 28, 2011, and we do not intend and undertake no duty to update.
With that, let me turn the call over to John.
John Donahoe eBay Inc. CEO
Well, thank you, Jenny, and good morning, everyone, and thank you again for joining us on such
short notice.
This morning we are thrilled to announce that weve reached agreement to acquire GSI Commerce. And
here is what we are going to do this morning.
Im going to talk briefly about why we are doing this and where it fits. Then Im going to ask
Chris Saridakis, whos going to lead GSIs business for us going forward, to describe a little bit
more about their business. And then Bob is going to describe the structure and terms of this
transaction, as well as what it means for our outlook and results.
Let me just say that simply put, this acquisition fits squarely in the direction we talked about
last month at our analyst day. Youll recall at that time, we talked about the industry being at an
inflection point, in particular that the boundaries between online and offline were blurring, and
that the commerce market was evolving with the new retail environment where retailers of all sizes
are looking for help to grow their businesses.
And youll recall that we said that our Company, we believe, is well positioned with a strong set
of assets to take advantage of what is a growing market opportunity, with two strong core
businesses PayPal and our marketplace, eBay Marketplace business with growing synergies in those
businesses. We talked about the accelerating pace of innovation, and you saw examples of the
innovation that we are driving forward, and we talked about an expanding opportunity set through
our open commerce platform.
Todays announcement, in acquiring GSI Commerce, fits squarely in that direction and in our
strategy. And in particular, GSI Commerce is going to help us accomplish three things.
One, it extends our Companys reach into large brands and retailers. Second, we believe the
combination of these two companies will strengthen GSIs business, and GSI will help strengthen
eBay and PayPals business, through incremental business. And lastly, that our two platforms can
come together and form an unmatched commerce services stack for retailers of all sizes.
Let me just elaborate briefly on each of those, and Im going to use for those following this
presentation Im only going to pull charts from our analyst day a month ago. The boundaries are
blurring. We talked about that mobile and smart phones are absolutely bringing offline retail
online at a pace that is far greater than it was 18 to 24 months from now.
And the implication of that is that retailers of all sizes must find buyers in new ways. Whether
you are the largest retailer or a small business, you need to go multichannel, you need to drive
demand in different and new ways; you need to reach buyers globally, not just locally; and you need
to keep up with the pace of innovation.
The number of retailers, large and small, that have come to us saying we are grappling with how
you deal with mobile commerce, we are grappling with how to deal in a social commerce world, we are
grappling with how to go global has been striking. And that we believe represents an opportunity
for our Company.
And so our strategy that weve outlined for the last several years, where we connect buyers and
sellers, we see GSI Commerce fitting squarely in that strategy because what GSI Commerce in
essence does is it enables large sellers, large retailers and brands, to meet buyers successfully
and effectively. So, GSI fits squarely in our strategy.
When you look at it across our portfolio, what we now have is a capability that extends from sole
proprietors to small businesses, now squarely into the large merchants. And you see the large
merchants market is enormous, $160 billion in the US. And now between GSI Commerce, our Bill Me
Later services, and some of the offline POS payment capability that Scott talked about at our
analyst day, our Company now has a strong and growing offering for large merchants and large brands
around the world.
And what is common about all of our assets is that we partner with retailers and we do not compete
with them, and we believe retailers are looking to partner with someone, not be concerned about
competition. So, how are we going to run this business?
We are going to run it as the third leg. We will run it as a separate business unit for 2011. Its
going to be run by Chris Saridakis who youll hear from in a minute. Chris has been running their
marketing services business and we are thrilled that he will be overseeing this whole business
unit.
The primary focus for GSI in 2011 is to focus on executing on their plan with large retailers and
brands, and we will begin to evolve our platforms toward a common direction which we believe can
serve large businesses and small across eBay, PayPal, and now GSI.
So with that, Chris, let me turn it over to you, and can you talk a little bit about GSI as a
company?
Chris Saridakis GSI Commerce CEO, Marketing Service Division
Sure. Thank you. Thank you, John, and let me just say that Im really excited about this
acquisition, and to be part of eBay. It strategically fits perfectly in place.
And for those of you who do not know GSI, we offer a broad suite of e-commerce solutions and global
marketing services. And what does that really mean? That basically squares up against a commerce
technology on the e-commerce side, fulfillment, and customer care.
We are 100% focused on the e-commerce side, in providing an end-to-end solution for our retail
partners. Our retail partners happen to be some of the largest retailers around the globe who
depend on us for not only our online execution, but also multichannel solutions.
As we look at the Global Marketing Services business, the goal of Global Marketing Services is to
continue to drive demand back into our retailers websites. And so we set it up strategically so
that on one hand, we could help our retailers execute and compete in a very competitive market,
online and both offline, while continuing to drive demand back to their site and continue to build
the analytics so that we can focus on reengineering a marketing plan, so that we can continue to
execute against the conversions back on the site.
This is the only company that enables all aspects of multichannel commerce. And with that, we have
a great list of leading brands and retailers that work with us.
Since the founding of GSI, this company has always focused 100% on going after really large brands
and retailers. Our focus, as you see on this slide, is with the top retailers and it will continue
to focus on bringing in large retailers, diversified across many different categories.
Retailers absolutely need a partner, not a competitor. As over the past 12, 13 years of the history
of GSI, weve been able to hone a lot of our technology and a lot of our knowledge around what
drives consumers to shop both on and offline.
And what weve discovered and what we know, is retailers need access to multiple channels to reach
customers and to generate demand. They also need flexible, customized solutions and the ability to
keep up with innovation and technology, both off and online.
Finally, they really need a trusted partner, someone who can innovate with them. And the
combination of eBay and GSI offers each one of our clients and our future clients that opportunity,
not only to expand the reach within the global marketplace with access to more than 95 million
customers, but the ability to continue to build a full suite of technology offerings by jointly
developing both what GSI has and what eBay already has.
So the goal is for eBay and GSI the combination as a strategic commerce partner of choice for
all of our customers around the globe. Many people know that GSI has been in business for quite
some time and has evolved our technology solutions.
We are close to releasing our V11 platform which is an enhanced platform, and basically the
problems that that solves for our customers is increasing many more of the management tools,
creating a lot more flexibility, giving them a lot more operational efficiencies so that they can
drive much more sales online and in-store. But furthermore, what makes this acquisition very
attractive, is for us to combine the efforts and co-develop what is essentially a commerce OS to
basically take commerce to the next level, and open up the system so that we can create unique
solutions that both connect on and offline, and leverage a developer network to help iterate and
improve a platform that is going global.
So in the end, our retailers depend on us to help grow their business every day, through our
technology and through our services. But whats also unique about this acquisition is the assets
that eBay has, that we could leverage and use within our current product set from local shopping
solutions with Milo, to mobile capabilities with Red Laser; and finally, Critical Path working
closely our Digital Agency in the global marketing side to help develop apps for many of our
retailers.
But whats impressive is the $1 billion of combined R&D spend that we will be able to leverage
jointly, so we build a better, stronger global platform. One of the areas where we will focus on is
having stealth-like execution in the numbers.
And I feel really confident that the 2013 outlook of revenue coming in at $1.1 billion to $1.3
billion and some of the key growth drivers for that are pretty important to spell out; and that is,
comp store growth is going to be one of the factors for driving it. But not only that, leading
multichannel innovation to help our clients draw the lines between on and offline and blur them
even more, to make us a lot more competitive.
Also, increasing new clients and geographic expansion will be key to our growth into 2013. We are
looking at a direct segment margin of anywhere between 19% to 21%, and feel pretty comfortable and
excited that we will be able to achieve these numbers.
So again, John and team, I am really excited to join eBay and look forward to the challenge and the
opportunity to grow this business globally. Thank you.
Bob Swan eBay Inc. CFO
Chris, thanks; its Bob. And, Chris, I want to welcome you to the team as well.
We are very excited to have you and the entire GSI Commerce team join the family of eBay. So, Im
looking forward to working with you and Im looking forward to you and the entire team blowing away
these numbers over the next three years as well. Let me provide a little more specifics about
todays announcement.
John and Chris talked about the strategic rationale and about GSI a little more specifically. Let
me just highlight a few of the specific deal terms.
First, eBay is acquiring GSIC for $29.25 per share, or approximately $2.4 billion. And we will
finance the transaction with cash and debt, and we expect to close in the third quarter of this
year.
Simultaneous with the closing, we expect to sell certain businesses of GSI that are not core to our
long-term strategy, to an entity formed by GSIs current CEO Michael Rubin. And we expect to and
our plans are to retain a financial interest in certain of them, and I will talk more about these
in a second.
Third, assuming we close in the third quarter mid-third quarter we expect the acquisition to
be immaterial to our 2011 non-GAAP EPS guidance announced on January 19 and have a $0.30 to $0.34
negative impact to our 2011 GAAP EPS guidance, including a GAAP charge primarily related to the
divested GSI businesses.
As Chris and John mentioned, this is an opportunity to use our balance sheet to enhance eBays
position as the strategic commerce partner of choice. Let me give a little more specifics about how
the transaction will work.
First, we are a acquiring the whole company that in 2010 generated $1.4 billion in revenue. As I
indicated, simultaneously we will be divesting some of the non-core assets for roughly $600
million. In particular, we will be selling 100% of the licensed sports merchandising business, and
the recently acquired Fanatics business.
In addition, we will be selling 70% of Rue La La and ShopRunner in the consideration that we will
receive and the selling of the divested assets includes roughly $31 million in cash, a seller note
from eBay of $467 million, and the retained stake, the retained 30% equity interest that we will
have in both Rue and ShopRunner. And, Michael, Im really looking forward to being a large
shareholder, to see you do with Rue and ShopRunner what youve been able to do with the GSI
business.
And what we will end up with is the strategic assets that John and Chris talked about, the global
e-commerce services business which is roughly $700 million in revenues in 2010; and the Global
Marketing Services business that was roughly $200 million in revenue in 2010. So as we the
assets we get generate about $900 million in revenue, and one thing just worth noting is in that
$900 million, it includes approximately $170 million of revenue associated with the owned inventory
model that GSI has been transitioning away from, and we expect that to contribute zero in revenues
in 2013.
So as I reflect back on the framework for growth that we set out for you back at our analyst day
just a couple weeks ago, we talked about four things protecting and extending our core
businesses, we talked about expanding our adjacencies, planting and growing seeds, and leveraging
both our platform capabilities and our balance sheet to strategically position us as the leading
player in e-commerce and commerce going forward. This acquisition of GSI checks every single box
that we talked about a couple weeks ago on our framework for growth.
As we think about synergistic value, it really comes in three ways. First, the business that we are
acquiring, as Chris indicated, it generated roughly $900 million in revenue in 2010, and we expect
it to grow to approximately $1.2 billion in 2013.
The business will be able to leverage some of our platform capabilities, and we believe we can
leverage some of GSIs platform capabilities. We will have the opportunity to dramatically expand
what has primarily been a domestic business, and make it a global business. And while this deal is
all about growth, there will be some cost synergies with corporate overlap and payment processing
costs that we will be able to realize.
Secondly, its not just about GSI, but its about its large client base of 180 merchants in the
e-commerce services business that we believe can use eBay as one of their primary channels of
distribution, and more and more of their large client base selling to the eBay platform we believe
can help expand GSIs clients, again both domestically and globally.
And the third component of synergies is PayPal and BMLs reach. Scott talked quite a bit about
PayPals strategy over the next three years of extending our merchant coverage and expanding
consumers preference in using PayPal and Bill Me Later at point-of-sale checkout.
GSI represents approximately a $3.5 billion business today, and Scott and his team through a
commercial relationship have been expanding their presence on the GSI network, and we expect to be
able to accelerate that more and more going forward. And as we think through 2011, 2012 and 2013,
we believe we will generate at least $60 million in synergies through GSI, through expanding its
merchants presence on eBay, and expanding PayPal and Bill Me Laters reach on the GSI platform.
So as I step back and reflect on the three-year numbers that we provided for you back at analyst
day, the PayPal business growing to $6 billion to $7 billion over the next couple of years and
generating 24% to 26% segment margins, we talked about eBay or the Marketplaces businesss plans
to grow to $7 billion to $8 billion by 2013, generating approximately 40% of segment margins.
And with our newest addition, with Chris leading the team, we expect GSI to generate $1.1 billion
to $1.3 billion in revenue by 2013, with their segment margins as they characterize for those of
you that know the business well NGIO margins of 19% to 21%. So as you look at our revised
aspirations for 2013, these will be additive to the numbers we gave you.
We believe by 2013 with the addition of GSI, we will be able to generate revenues of $14.1 billion
to $13.6 billion, generate non-GAAP EPS growth of 12% to 16% CAGR over the three-year timeframe,
and free cash flow of $8 billion up to $9 billion over the course of the three years. So as John
captured at the beginning, we sent out some key messages from our analyst day just a month ago.
Todays announcement, the acquisition of GSI Commerce, extends our reach with large brands and
retailers, brings together complementary capabilities in a manner which strengthens GSI and helps
our existing core businesses, and extends our open commerce platform capabilities. And as I said
when I started, we are very excited by the prospects of this combined company as we think about
being the leading player on a go-forward basis in e-commerce and in commerce at large.
Operator, with that, thats the end of our prepared remarks and we would love to entertain
questions.
QUESTION AND ANSWER
Operator
(Operator Instructions) Sandeep Agarwal, Caris & Company.
Sandeep Aggarwal Caris & Company Analyst
Thanks for taking my question. Just one question on clearly theres a lot of synergies in
terms of eBay getting access to these 180 very large multichannel retailers.
Can you elaborate how do you plan to leverage GSI fulfillment capabilities? Would we expect
something like fulfillment by eBay or maybe any other more than (inaudible) type of service
level like (inaudible) from eBay where shipping experience enhanced for buyers?
John Donahoe eBay Inc. CEO
Yes, Sandeep, why dont I comment on that?
GSI does bring strong fulfillment capabilities for their large merchants, and thats an important
part of their service offering that many of their customers take advantage of. Obviously, over
time, this could provide an opportunity for some of the larger eBay sellers to take advantage of
those fulfillment capabilities.
And as I said earlier, the focus in 2011 is going to be for GSI to focus on their existing customer
base and execute on their plan, and what well do is we will introduce GSIs capabilities to some
of eBays largest sellers. But we are not putting that that is an incremental opportunity; we
are not putting any of that in the plans that youve heard us talk about today.
But we do feel like theyre fulfillment capabilities, and frankly some of what Michael will be
doing in ShopRunner will provide some assets and capabilities that eBay sellers will, over time, be
able to take advantage of. (multiple speakers) the numbers that we talked about today.
Operator
Scott Devitt, Morgan Stanley.
Scott Devitt Morgan Stanley Analyst
Thanks. John, first, wanted to see if you could just rank the where you think the most
significant long-term opportunities are from if you think of fulfillment by eBay as potentially
one opportunity, bringing large retailers onto eBay, eBay becoming the partner of choice for third
parties on the Internet, globalization and PayPal. And then I had a follow-up.
John Donahoe eBay Inc. CEO
I think the biggest opportunity is these large merchants are looking for help, and I hear that
from Scott Thompson who is constantly out talking to large merchants on behalf of PayPal. And what
they are saying to Scott is, we need help from more than just payments, Scott. We need help to grow
our businesses, we need help with mobile commerce, we need help figuring out social commerce.
And when we looked around about who is actually providing that help today, it is GSI. And so what
has clearly happened here is that Scott and GSI had a commercial relationship, and the more we talk
between the two companies, we were hearing the same thing and we felt like this opportunity to help
large merchants and large brands compete in a multichannel world, we could be an effective and
useful partner.
And I think all of us think thats the biggest core opportunity thats in front of us. And it is
globally, that there Michael was saying that he called a couple of their large merchants this
morning, and one of the largest brands, one of the most globally well-known brands in the world
Michael, I wont repeat their name said you know what? Can they help me go global? I need to go
to Asia, I need to go to Europe. And so thats a place where the kind of eBay synergies along with
GSI I think can really help these merchants succeed. And what we share is we want to be a partner,
not a competitor.
Scott Devitt Morgan Stanley Analyst
Thanks for that. The follow-up is just related to the licensed sports business, the new
business that Michael is forming.
And Im wondering, are you retaining the fulfillment and other relationships that those licensed
businesses actually hold with legacy GSI? And are there any change-of-control clauses in the
existing arrangements? Thanks.
John Donahoe eBay Inc. CEO
Bob, why dont you address that?
Bob Swan eBay Inc. CFO
Scott, thanks. Yes, as I know you are aware, the GSIC infrastructure has nine fulfillment
centers, seven domestically and two internationally.
Michael and the newly formed company will take the Fanatics the existing Fanatics warehouse, and
will take another one of the remaining eight. So we will retain seven fulfillment centers, and
Michael will take two, including the Fanatics acquisition sorry, including the Fanatics
warehouse.
Your second question about change-of-control, Im not exactly sure what you are asking there,
Scott. So could you give me a little more color?
Scott Devitt Morgan Stanley Analyst
Well, sure. Retailers have contracts that, when they come up with GSI or renegotiate it,
sometimes at different rates, and Im just wondering if theyre from a control standpoint, given
the ownership changing, if the existing (multiple speakers)
Bob Swan eBay Inc. CFO
I got it. Great, thanks for the clarification.
So, first and foremost, as we indicated, GSI has long-standing relationships in the e-commerce
services business with 180-plus top brands and retailers. Those contracts are relatively long-term
in nature.
I would say that they are there because the GSI team executes and serves those client every day,
and thats the primary focus of the team. At the same time, theres essentially no
change-of-control provisions in their customer contracts.
So with this transaction, no contracts will be terminated. At the same time, we focus on earning
those contracts every day going forward, and thats the way the GSI team has built those firm
relationships, and that will continue going forward.
John Donahoe eBay Inc. CEO
Thanks, Scott.
Jennifer Ceran eBay Inc. VP, IR
Next question?
Operator
Mark Mahaney, Citigroup.
Rohit Kulkarni Citigroup Analyst
This is Rohit Kulkarni filling in for Mark.
Can you talk about the synergies, just from a marketing services standpoint? What do you think that
can happen to marketing services that eBay provides?
And secondly, what gives you kind of greater confidence with regards to growing the GSI core
business at 17%, 18%, 19% CAGR over the next three years? Is it more margins signing up with GSI?
Is it more merchants selling more stuff on eBay, or anything else?
John Donahoe eBay Inc. CEO
Thanks for the question. I will tackle it and then Chris will Ill set a very low bar for
Chris and he will leap over it.
First, in terms of the synergies with marketing services, I see it going really two ways. One is,
eBay over the years has developed some competencies and capabilities to drive demand to the eBay
site, whether it is our what I would characterize as world-class keyword buying capabilities with
our Triton engine, whether its our affiliate network that weve developed over time, we have some
capabilities and technologies that we have used that may be valuable to Chris and his clients.
On the flip side, Michael and Chris have assembled quite a bit of capabilities in terms of e-mail
capabilities, agency capabilities. And we believe that they may be able to help and enhance eBays
demand-generation capabilities. So I think in both companies, we have some competencies we think we
can each leverage from, and from that, we see natural synergies.
I should say that as you can tell by the numbers, we didnt count on a whole lot in the numbers we
shared with you, but thats not an indication of how excited we are about where the synergies
actually exist. I think the second question was just on EBITDA margins, if you will.
I think if you look at the business that we are acquiring today, its roughly a 15%, mid-teen
EBITDA margin. And Chris laid out about a six-point improvement over the course of the next three
years, and I think theres really three things.
One is and most importantly, is the growth and evolving mix of the business. So we expect marketing
services thats a higher-margin business to continue to grow more than the overall business.
Secondly, as I indicated, the team has been winding down its inventory-related sales, and that as
you are probably aware is relatively low-margin. So as that revenue goes away, that mix effect will
be a positive impact on the segment margins for the business.
Third, we talked about some synergies that we think we can get in the G&A infrastructure and lower
payments-processing costs with the PayPal team on the GSI platform. But lastly on synergies, and
margin expansion, this is about growth.
This is an acquisition about an e-commerce growth rate that is accelerating, lines that are
blurring between on and offline. We think the collection of capabilities well positions us to help
merchants, brands and retailers around the world grow fast, and thats the reason for this
acquisition.
We will get good growth, we will get good margin expansion. But primarily, this is about serving
customers better and helping them grow their businesses. Chris, I know that you are more eloquent
and more familiar with it; would you care to just tell everybody how low my expectations are, or
?
Chris Saridakis GSI Commerce CEO, Marketing Service Division
Well, thanks, Bob. They actually are fairly low; we actually are pretty excited about
John Donahoe eBay Inc. CEO
That was easy!
Chris Saridakis GSI Commerce CEO, Marketing Service Division
the opportunities, not only just with the margin expansion, but going back to your earlier
part, the Global Marketing Services. We do work with eBay quite a bit in our e-mail products.
We have some great products that we had just acquired last year of FetchBack, a re-targeting tool,
a mobile SMS platform. So there are some ways in which we can work together to actually expand
those products throughout eBays marketplace and PayPal, and push those products around the world.
And thats exciting; thats new growth on top of a fast-growing business.
And then I think you covered it fairly well, Bob; we believe the comps will continue to grow our
revenue. We are focused 100% on growing this business, and while extracting out any extra costs
that we can, and getting the benefit from both a high, fast-growing business and the efficiency on
the bottom line.
Jennifer Ceran eBay Inc. VP, IR
Next question, Operator?
Operator
Spencer Wang, Credit Suisse.
Spencer Wang Credit Suisse Analyst
Good morning. Just two quick questions.
I was wondering I guess for Chris whats the overlap between GSI clients and PayPal and Bill
Me Later? I guess how many of your GSIs clients use PayPal or accept PayPal and Bill Me Later?
And second, for Bob, I was just wondering if you could just give a little bit more details about
the $60 million in synergies in 2013. Is that largely the G&A component and the payment-processing
costs, or how much is in there for some of the revenue synergies? Thanks.
Michael Rubin GSI Commerce CEO
Sure. This is Michael; I will hit the first question as it relates to Bill Me Later and PayPal
penetration.
Weve been partnered with Bill Me Later I think ever since Gary started the business a long time
ago, and PayPal is actually so (inaudible) we started with in the last several years, and weve
been amazed at how much of a positive impact its had on our clients businesses. Without giving
out any specific numbers, I think this year, the penetration and dollars that go through PayPal and
Bill Me Later will be at least four or five times what they were last year. So without question,
PayPal is the fastest-growing payment tender that we take at GSI, and what we are finding is better
conversion in checkout through PayPal than our traditional checkout.
So I will tell you, Scott did a great job spending years really convincing us of how good this was.
And like a lot of big retailers, we really like to wait and see, and what weve seen now that weve
got a lot of history is great results, fastest-growing payment tender, better conversion in
checkout. And also, now with this acquisition, access to PayPals 94 million customers that can
uniquely help GSI clients drive demand to our clients, something that they are very excited about.
Bob Swan eBay Inc. CFO
Great. Thanks, Michael.
Relative to synergies, Id break it out as follows first, on the GSI synergies, we expect
roughly $40 million. On the PayPal growth from higher coverage with PayPal and with Bill Me Later
and more consumer adoption, we see roughly 20. And from expansion on the core eBay platform, we see
roughly 20. And then we know that theres some costs along the way that help us get there, so net
synergies of about $60 million in 2013.
In terms of the GSI synergies, as I indicated, we will clearly have some corporate overlap that we
will work our way through. Clearly theres some PayPal contracts and lower-cost processing that
will benefit the business, and those are going to be the primary components over the next couple of
years.
We do expect as we get into 2013 and move into 2014, after the deployment of the next-generation
release of Version 11 of GSI through the existing client base, that the technology spend will come
down over time. But we dont expect much of that in 2012 at all, relatively modest in 2013; but
expect a little bit more as we go into the future.
Spencer Wang Credit Suisse Analyst
Great, thank you very much.
John Donahoe eBay Inc. CEO
Thanks a lot for that question.
Operator
James Mitchell, Goldman Sachs.
James Mitchell Goldman Sachs Analyst
Great, thank you. I wanted to ask two quick questions.
One, more financial in nature, I just want to check the funding of the transaction. I assume that
eBay is using its onshore cash balance which I think was about $2.5 billion to $3 billion at the
end of last year.
And then the second question, more operational, when I look at the revenue targets for the acquired
GSIC businesses in 2013, do you implicitly assume that owned inventory sales disappear completely,
or do some of those reappear as non-inventory e-commerce sales in the 2013 revenue forecast?
Bob Swan eBay Inc. CFO
James, on the second on the second one, yes, we expect essentially zero inventory from the
inventory-related gross revenues in 2013. As I indicated last year, it was about 170, and we expect
it to go down over time.
In terms of how we will finance the transaction, yes, we had about $2.7 billion in cash in the US
at the end of the year, and we indicated that we would expect to use both cash and debt, which I
would anticipate being from our CP program. Its been in place for a while now. So primarily
US-based cash, but we will also have significant CP capacity in a backup revolver weve put in
place a couple of years ago. Thanks a lot, James.
Jennifer Ceran eBay Inc. VP, IR
Next question?
Operator
Justin Post, Bank of America-Merrill Lynch.
Paul Beaver BAS-ML Analyst
This is [Paul Beaver] for Justin Post.
I might have missed it, but have you commented on the percentage coverage of GSIs customer base in
terms of how many are currently using PayPal?
Michael Rubin GSI Commerce CEO
Its Michael; I will hit that. I think if you were to ask that question a year ago, I think
maybe half of our customers would have taken standard PayPal.
Today, most customers take PayPal and most customers take PayPal Express. And the interesting thing
that weve learned is when you go from traditional PayPal to PayPal Express, not only does the
penetration go up, the conversion goes up in checkout. So its both a big win for eBay and a big
win for our clients and is creating terrific results.
One question that people havent asked, is whats the opportunity for our retailers within eBay
Marketplace. I only had a chance to speak to a few of our largest partners this morning, but one of
the things I was fascinated with was, right away, people kind of keyed in and said you know, the
biggest cost for our retailer is the markdowns that they have in their stores, and cant eBay
Marketplace help us to have a lower cost of markdowns to use instead of one store location to sell
to a local base of customers, to use the whole world through eBay Marketplace?
So, I think while PayPal was not meaningful to us a few years ago and today is, again, our
fastest-growing payment tender with terrific conversion, I think that same opportunity exists for
eBay Marketplace to help our merchants sell their excess inventory, which is for a retailer the
single biggest cost of operations, which is their markdowns. And we think thats going to be a
gigantic opportunity in the future.
Paul Beaver BAS-ML Analyst
And are there any synergy opportunities for PayPal and eBay to use GSIs Digital Agency from
licensing services?
Bob Swan eBay Inc. CFO
Yes, we mentioned that a bit earlier, an earlier question was about where we saw synergies
between eBay and marketing services. And we see synergies going both ways in terms of eBay using
marketing services capability, and marketing services and GSI as a whole using some of the
technologies and demand-generation capabilities that weve built over time. So yes, we do see
synergies there, we are excited to use those capabilities to drive more demand to both the
marketplace and GSI clients over time.
John Donahoe eBay Inc. CEO
I want to go back to what Michael was saying and just draw the link that Im sure all of you
are seeing. Youll recall at our analyst day when Doug McCallum who ran who runs eBay Europe
stood up and talked about how the results of eBay UK which is growing faster than the market
was directly driven by the ability to pull branded retailers onto eBay, and you remember SuperDrive
being an example of a branded retailer in the UK that used eBay as an important incremental channel
for initially their markdown, and increasingly their other merchandise, and we believe and you
heard Chris Payne who runs eBay North America, talk about the same opportunity in North America.
We believe this acquisition can help accelerate bringing those branded retailers and brands onto
eBay in a way that will be both incremental growth for those customers, those 180 GSI customers, as
well as incremental growth for the eBay Marketplace.
Next question, please?
Operator
Youssef Squali, Jefferies & Company.
Youssef Squali Jefferies & Company Analyst
Thank you very much, two quick questions, please. Can you speak to the new partnership you
guys are forming with Michael?
The rationale of keeping 30% of that, just how big an opportunity do you see there? And why
actually not keep Rue La La? Because it seems to be somewhat tangential to the business, but could
add some value. Thanks.
John Donahoe eBay Inc. CEO
Youssef, thanks.
So, we clearly see the most strategic component of this acquisition being the e-commerce services
and marketing services, and thats where we play. Thats where GSI plays and thats where we see
natural complementary capabilities that we want to capitalize on.
Where we clearly saw no real opportunity is in the Fanatics and sports licensing business. Thats
not core to what we do, its an inventory-related model.
We do not want to be in competition with our community of sellers, and that business would in fact
be in competition. Thats a place that we just do not want to go.
The Rue and ShopRunner are a little bit different. I would characterize them as, first, near-term
operating losses; second, high beta; third, huge opportunity; and fourth, if we tried to realize
their opportunity, we would probably screw it up.
And it just so happens that, in Michael, we see a guy who can take those concepts Rue and
ShopRunner to a level that we couldnt imagine, and our 30% interest is our indication of how
excited we are in seeing what Michael can do to both of those businesses over time. So, sports
licenses and Fanatics, not core to what we do; massive conflict with our community of sellers. The
other is more high beta, but high return, and we wanted to maintain a stake in those to see what
Michael could do with them.
Bob Swan eBay Inc. CFO
And we mentioned to Michael this morning that our 30 percentage in Skype has turned out to be
quite valuable, and he assures us that this 30% interest could with his efforts, its going to
pay for the whole deal over a few years, right, Michael?
Michael Rubin GSI Commerce CEO
I wish you gave me something higher to reach for. It was pretty nonaggressive (laughter)
Youssef Squali Jefferies & Company Analyst
All right, thank you.
John Donahoe eBay Inc. CEO
And obviously there will be a chance to work together, that if we can expose Shoprunner to
eBay sellers, if we can expose Rue to eBay, I mean there are going to be some natural synergies
that I think will develop through the commercial relationship.
Michael Rubin GSI Commerce CEO
I think the single thing that Im most excited about is the feedback that I already heard from
clients today, of how we can better help them to solve their problems, and I think Bob and John,
you guys did a great job of hitting that. But whether its Rue La La or ShopRunner, or whether its
the core e-commerce and marketing services business, whats great is our clients Im already
hearing this and seeing e-mails wow, is great for us, how can you help us solve this problem,
how can you help us solve that problem? How can we do this more quickly?
So, just the excitement from our clients is just, its great and thats the thing that I think is
really going to drive incremental growth for us.
Youssef Squali Jefferies & Company Analyst
Thanks.
Jennifer Ceran eBay Inc. VP, IR
Next question?
Operator
Colin Gillis, BGC Financial.
Colin Gillis BGC Financial Analyst
John, I just want to get back to that 180-customer comment. How many of those customers is the
real opportunity? Is it all of them, or is it a portion of them? And are you working with any of
them currently?
John Donahoe eBay Inc. CEO
Well, I think the short answer is, we dont know. What I said earlier, that what we are
hearing from large retailers across the board whether through PayPal or what Michael just
Chris had described through the GSI experiences, they are having growing needs. The market is
changing.
The blurring lines between online and offline has got retailers realizing that theyve got to
compete globally, theyve got to go multichannel. And so, we havent gone through systematically
the 180 clients, but thats one of the obvious things we will do over the next three to six months
is we will jointly call on GSIs client base and include PayPal, eBay and GSI will be at the
table and say, how can we help and how can our collective set of assets help them grow their
businesses?
And I think we will have a fairly high take-up rate. So we havent quantified it and youve seen
what weve put in the synergies, a relatively modest amount.
Colin Gillis BGC Financial Analyst
Is there an analytics play here as well? I mean, is there a data excellence that GSI has and
does it get strengthened by this deal?
John Donahoe eBay Inc. CEO
Again, think I would characterize that as an unexplored synergy. We havent yet had the
marketing and services team and our eBay team sit down and say what kind of data and analytics do
we have? Chris is nodding here; I think all of us sense theres some real synergy and opportunity
there, but I would characterize it as as of yet unexplored.
Colin Gillis BGC Financial Analyst
Good.
John Donahoe eBay Inc. CEO
So we have time for one more question.
Operator
Colin Sebastian, Lazard Capital Markets.
Colin Sebastian Lazard Capital Markets Analyst
Great, good morning. Thanks and congratulations.
Just one question quickly on the $170 billion of owned inventory revenues in 2010 not included in
the going-forward guidance. Is that migrating to a commission model, or is that part of the
business thats going away?
And then lastly, curious if you actively looked at some of the e-commerce technology companies that
have more of a software-only focus as an option to extend eBays reach. Or was it the full
end-to-end platform that really provided the value that GSI brings? Thank you.
Bob Swan eBay Inc. CFO
On the Colin, thanks on the first question, this is the migration of inventory owned to
a services model that the Company has had underway for almost two years now. So its not the assets
that are being divested, its the core theyve been migrating to a service-based offering for a
while now.
In terms of the landscape of players, I mean obviously we continue to look at whats the best and
most effective way to assemble capabilities to serve the needs of merchants and retailers, and
weve concluded that by a longshot, this is the best asset, the most scarce asset with a broad set
of capabilities that are what merchants and retailers are looking for today. And they can do that
both as a bundled service and increasingly as an unbundled service, depending on the needs of the
specific client.
So we are very excited about its collection of capabilities, its ability to be a one-stop shop, but
also an evolving platform that enables it to deal with unbundled needs of particular clients.
Colin Sebastian Lazard Capital Markets Analyst
Great. Thanks again and congratulations.
Bob Swan eBay Inc. CFO
Thank you.
John Donahoe eBay Inc. CEO
All right. Thank you, everybody. We look forward to convening again at our Q1 earnings call in
a few weeks, and we look forward to getting this deal closed and executing ahead. Thanks for
joining us this morning.
Operator
Ladies and gentlemen, thank you for participating in todays conference. This does conclude
the program, and you may now disconnect. Everyone, have a great day.
Cautionary Statement Regarding Forward-Looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, are forward-looking statements. These forward looking
statements address, among other things activities, events or developments that we expect, believe
or anticipate will or may occur in the future, including our statements relating to the anticipated
effects of the proposed merger with eBay and its anticipated benefits if consummated. These
forward-looking statements are subject to a number of risks that could cause actual results to
differ materially from those contained in the forward-looking statements, including the risk that
our stockholders may not approve the merger and that the regulatory approvals and any other
required approvals in connection with the merger may not be obtained on the proposed terms or at
the times anticipated, as well as the risk factors described Item 1A of our 2010 Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the SEC).
Currently unknown or unanticipated risks, or risks that emerge in the future, could cause actual
results to differ materially from those described in forward-looking statements, and it is not
possible for us to predict all such risks, or the extent to which this may cause actual results to
differ from those contained in any forward-looking statement.
Except as required by law, we assume no obligation to update publicly any such forward-looking
statements, whether as a result of new information, future events, or otherwise.
Important Merger Information
This communication may be deemed to be solicitation material in respect of the proposed acquisition
of GSI Commerce by eBay. In connection with the proposed acquisition, GSI Commerce intends to file
a proxy statement on Schedule 14A with the Securities and Exchange Commission, or SEC, and GSI
Commerce and eBay intend to file other relevant materials with the SEC. Stockholders of GSI
Commerce are urged to read all relevant documents filed with the SEC when they become available,
including GSI Commerces proxy statement, because they will contain important information about the
proposed transaction. A definitive proxy statement will be sent to holders of GSI Commerce stock
seeking their approval of the proposed transaction. This communication is not a solicitation of a
proxy from any security holder of GSI Commerce.
Investors and security holders will be able to obtain the documents (when available) free of charge
at the SECs web site, http://www.sec.gov. In addition, GSI Commerce stockholders may
obtain free copies of the documents filed with the SEC when available by contacting GSI Commerces
Investor Relations at 610-491-7068.
Such documents are not currently available. You may also read and copy any reports, statements and
other information filed with the SEC at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SECs website for
further information on its public reference room.
GSI Commerce and its directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the holders of GSI Commerce common stock in respect of the proposed
transaction. Information regarding the directors and executive officers of GSI Commerce is
available in the 2010 Annual Report on Form 10-K, filed with the SEC on March 1, 2011, and the
proxy statement for GSI Commerces 2010 Annual Meeting of Stockholders, filed with the SEC on April
13, 2010. Additional information regarding the interests of such potential participants will be
included in the proxy statement and the other relevant documents filed with the SEC when they
become available.