PayPal to Acquire VeriSign’s Payment Gateway
SAN JOSE, Calif. and MOUNTAIN VIEW, Calif., Oct. 10 /PRNewswire-FirstCall/
– eBay (Nasdaq: EBAY) and VeriSign (Nasdaq: VRSN) today announced a strategic
alliance that calls for the two companies to collaborate on payment services
and security initiatives for e-commerce. Under the terms of the agreements,
PayPal, an eBay company, will acquire VeriSign’s payment gateway business and
combine it with PayPal’s leading merchant services platform. VeriSign will
also provide eBay and PayPal with a suite of security services that includes
the deployment of two-factor authentication, a security system that gives
customers a one-time password or digital certificate to help protect against
online identity theft.
With the acquisition of VeriSign’s payment gateway, which processed more
than $40 billion in total payment volume in 2004, PayPal plans to accelerate
its merchant services business by expanding its customer base to tens of
thousands of new small and medium-sized business customers online. The
payment gateway is a real-time, scalable Internet payment platform that allows
merchants to authorize, process and manage online payments. The combination
of VeriSign’s payments gateway with PayPal’s existing services will provide
merchants with multiple processing choices from a single provider, including
VeriSign’s gateway, PayPal’s Website Payments Standard, Express Checkout or
Website Payments Pro.
Additionally, eBay and VeriSign have signed a multi-year security
technology agreement that calls for eBay to invest in the deployment of
VeriSign technologies that enable and protect online transactions, including
the purchase of up to one million two-factor authentication tokens. eBay and
PayPal plan to begin the rollout of two-factor authentication to customers in
2006, including marketing and security programs designed to promote customer
adoption.
“VeriSign’s payment gateway is a popular and market-proven product that
perfectly complements PayPal’s existing payment services,” said Jeff Jordan,
president of PayPal. “We’re very excited about the opportunity to extend the
benefits of PayPal’s services to the VeriSign customer base. This acquisition
allows PayPal to give our customers more choice in payment services and grow
our merchant services business even more quickly.”
“At eBay, we’re always looking for additional tools and technologies to
improve the security of our community’s accounts and ensure the privacy of
information. Two-factor authentication will be another important way
customers can shop safely on eBay and pay with PayPal,” said Rob Chesnut,
senior vice president of trust and safety for eBay. “We’re thrilled to be
working with VeriSign, and are proud to be one of the first e-commerce
companies to give our customers access to two-factor authentication.”
“The alliance between VeriSign and eBay brings together two leaders in
online commerce. eBay’s deployment of two-factor authentication will represent
one of the largest consumer authentication deployments in the industry,” said
Stratton Sclavos, chairman and chief executive officer, VeriSign. “After the
asset sale of our payment gateway business, VeriSign will continue to focus on
our core mission of enabling and protecting all forms of digital interactions.
In addition, the acquisition provides our worldwide merchant base with the
benefits of PayPal’s already robust payment capabilities.”
PayPal will pay approximately $370 million to purchase VeriSign’s payment
gateway business, payable in cash and/or eBay stock. Including synergies with
PayPal’s merchant services business, the payment gateway business is expected
to generate an incremental $100 million of revenue at a 20 percent pro forma
operating margin in 2006.
VeriSign will provide financial guidance regarding the transaction and its
impact to future guidance upon closing.
The acquisition is subject to regulatory and other approvals, and is
expected to close in the fourth quarter of 2005.
