What is the total potential cost of the Skype acquisition to eBay?

The initial payment for the Skype acquisition is approximately €2.1 billion ($2.6 billion). Additionally, eBay may pay up to approximately €1.2 billion ($1.5 billion) in earn-out payments if Skype achieves certain performance targets by June 30, 2009. This brings the total potential consideration to approximately €3.3 billion ($4.1 billion).

How much of the acquisition price is in cash versus eBay stock?

The initial payment consists of approximately $1.3 billion in cash and the value of approximately 32.4 million shares of eBay common stock. The exact value of the stock component would fluctuate based on eBay's stock price at the time of closing.

What are the conditions for the earn-out payments?

The earn-out payments are contingent upon Skype achieving specific performance targets related to net revenue and gross margin, gross profit, and the number of active users. These targets must be met over any four-quarter period between January 1, 2006, and June 30, 2009. Additional bonus earn-outs are payable if Skype exceeds targets in calendar year 2008.

Are there any restrictions on the eBay stock being issued to Skype's sellers?

Yes, the eBay stock issued to Skype's sellers is considered unregistered securities. There are contractual restrictions on the transfer and resale of these shares, with specified lapse dates occurring at 180, 360, 540, and 720 days following the acquisition's closing, depending on the seller's payment election.

EBAY 8-K: Material Agreements & Securities & Listing

Summary

This 8-K filing is an amendment to a previous report, primarily providing details on eBay Inc.'s material definitive agreement to acquire Skype Technologies S.A. The acquisition's initial payment is approximately €2.1 billion ($2.6 billion), composed of cash and eBay common stock. A significant portion of the deal's value is tied to potential earn-out payments, up to approximately €1.2 billion ($1.5 billion), contingent on Skype achieving specific performance targets related to active users, gross profit, and revenue through June 30, 2009. These earn-out payments add a variable component to the total acquisition cost, with the potential for increased valuation for sellers electing this option. The filing also addresses the unregistered sale of eBay common stock to Skype's sellers, conducted under exemptions from registration requirements. Restrictions on the resale of these shares are detailed, with timelines for their lapse. The acquisition is subject to customary closing conditions, including the assumption of Skype stock options by eBay, ensuring a comprehensive transition of the acquired entity. Investors should note the significant cash and stock outlay, coupled with performance-based contingent payments that could materially increase the acquisition cost.

Key Highlights

1eBay Inc. entered into a Sale and Purchase Agreement to acquire Skype Technologies S.A. for an initial payment of approximately €2.1 billion ($2.6 billion).
2The initial payment includes approximately $1.3 billion in cash and the value of about 32.4 million shares of eBay common stock.
3Potential earn-out payments of up to approximately €1.2 billion ($1.5 billion) are tied to Skype achieving specific performance targets by June 30, 2009.
4Performance targets for earn-outs include net revenue, gross margin, gross profit, and active users.
5Approximately 60% of Skype shareholders elected to receive a portion of their payment as earn-out, while 40% chose a fixed consideration.
6The eBay stock issued in connection with the acquisition is being sold as unregistered securities, with resale restrictions in place for sellers.
7Acquisition closing is contingent on customary conditions, including the assumption of at least 85% of Skype stock options.

EBAY INC 8-K/A Report, Material Agreement (Oct 13, 2005)

Summary

Key Highlights

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