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eBay buys PayPal for $1.5 billion

NEW YORK (CNN/Money) -- eBay said Monday it will acquire Internet payment service PayPal in an effort to simplify online buying and selling and also bumped up earnings guidance for the second-quarter by 2 cents a share.

The online auction company said it will swap 0.39 share of its stock for each outstanding share of PayPal. Based on eBay's price Friday, the acquisition is valued at $1.5 billion. According to preliminary estimates, the purchase price also is expected to include approximately $18 million for acquisition-related costs.

eBay said the company initially will incur incremental charges for stock-based compensation and amortization of about $4 million and $9 million per quarter, respectively. eBay spokesman Kevin Pursglove said he could not immediately discuss how many quarters will be affected by the charges.

eBay also said it expects to report pro forma second-quarter income of 19 cents a share, 2 cents above the previous forecast, citing a 48 percent improvement over last year in its U.S. transactions business. The company is scheduled to report financial results July 18.

"eBay and PayPal have complementary missions. We both empower people to buy and sell online," said Meg Whitman, president and CEO of eBay. "Together we can improve the user experience and make online trading more compelling."

Following the deal, PayPal will continue to operate independently. About 60 percent of PayPal's business currently comes from eBay, and eBay said it will phase out its Billpoint pay system when the PayPal acquisition becomes final.

The deal, which is subject to shareholder and government approval, is scheduled to be completed by the end of 2002.

PayPal, which said June 12 that its second-quarter pro forma earnings per share would be 8 or 9 cents, is set to report its quarterly results July 24.

Shares of eBay (EBAY) rose $1.46 to $60.55 and shares of PayPal (PYPL) gained 92 cents to $20 Friday


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