Thursday, September 22, 2005

EBAY NEWS - eBay To buy Skype! Lots of opportunities here!

Ebay to buy Skype
Fri Sep 16, 2005 1:59 AM BST
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By Eric Auchard

SAN FRANCISCO (Reuters) - EBay Inc. (EBAY.O: Quote, Profile, Research) plans to pay between $3.7 billion and $4.1 billion (2-2.3 billion pounds) to acquire Skype, depending on how fast it meets three growth targets, the online auction leader said in a U.S. regulatory filing on Thursday.

As previously disclosed, the Silicon Valley-based company agreed to pay cash of around $1.3 billion and another $1.3 billion in eBay stock to acquire Skype, a fast-growing, closely held supplier of Internet-based telephone calling services.

In addition, eBay spelled out some details of an "earn out" plan for a future payout to certain Skype shareholders based on targets being met for active users, gross profit and revenue, according to a U.S. Securities and Exchange Commission filing.

An earn out clause specifies terms by which entrepreneurs can receive further payments from the sale of their company if they achieve certain growth targets after a buyout.

EBay did not quantify the three specific targets. An eBay spokesman said the company would provide no further details.

In just two years, Skype Technologies SA (SKYP.UL: Quote, Profile, Research) of Luxembourg has attracted 54 million members to its free Internet-based voice service and is on pace to roughly double in size again within a year.

The base-level amount of this earn out agreement is 900 million euros, or $1.1 billion. Skype investors would receive this payment if it meets each of the three growth targets over any four-quarter period before June 30, 2009.

An additional bonus of up to about 300 million euros, or about $400 million, would be payable if the targets are hit during calendar 2008. The eBay-Skype deal is expected to close in the fourth quarter of this year, eBay said.

The maximum additional payout for meeting these growth targets would add up to 1.2 billion euros, or $1.5 billion. EBay can elect to pay the earn out in either cash or stock.

Skype shareholders who participate in the plan are bound by a non-competition agreement through mid-2009, the filing said.

Shareholders representing about 40 percent of all Skype shares chose to receive a single payment in cash and eBay stock at the close of the transaction. Holders of the remaining 60 percent of Skype shares chose to receive a reduced up-front payment in cash and eBay stock at the close of the deal in exchange for the potential future earn-out payments.

The deal is contingent on shareholders representing 85 percent of the outstanding Skype stock options taking part.

Skype's shareholders include co-founders Niklas Zennstrm and Janus Friis, some of Skype's reported 200 hundred or so employees and private equity investors including Mangrove Capital Partners, Draper Fisher, Bessemer Venture Partners and Index Ventures.



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