|PayPal Inc. shareholders approved a $1.3 billion merger with eBay on Thursday, brushing aside legal challenges to the deal with the online auction giant. |
Holders of nearly two-thirds of the company's 61.6 million outstanding shares voted in favor of the merger, and no one at the sparsely attended meeting voiced the objections raised in lawsuits over the share price and patent infringement allegations.
Hours after the meeting, PayPal chief executive Peter Thiel announced his resignation. His duties will be assumed by Matt Bannick, an eBay senior vice president.
The all-stock acquisition gives eBay control of the Internet's largest purveyor of online payment services between individuals and businesses. When the deal closes later this year, PayPal insiders will collectively reap, on paper, nearly $600 million.
For eBay, the acquisition should fatten an already bulging bottom line. About two-thirds of PayPal revenues come from fees generated by eBay auction transactions. PayPal has some 20 million registered users, including 3.7 million business accounts. Since 1999, PayPal says it has moved an estimated $10 billion through the online service.
Under terms of the merger agreement announced last July, PayPal shareholders will receive 0.39 shares of eBay stock for every share of PayPal. EBay's offer valued PayPal at $23.61 per share on the day of the announcement, a price touted by both companies as an 18 percent premium above PayPal's market value before the merger was announced.
Based on eBay's close Wednesday, PayPal stockholders would receive $20.79 per share. EBay closed Wednesday at $53.30, while PayPal closed at $20.75.
In trading on the Nasdaq Stock Market, PayPal shares fell 53 cents to close Thursday at $20.22 while eBay shares fell $1.40 to $51.90.
If eBay stock remains near its current level, former PayPal CEO Elon R. Musk will receive nearly $148 million worth of eBay stock, while Michael Moritz, a director, and his investment firm, Sequoia Capital will collect about $111 million. PayPal CEO Peter A. Thiel will reap nearly $58 million and the company's chief technology officer, Max R. Levchin, stands to make $36 million.
Their big payday was the catalyst for at least six shareholder lawsuits filed in Delaware and California seeking to halt the merger. Plaintiffs in those cases claim the eBay offer was inadequate and they should receive more. The California cases have been placed on hold pending a decision in the Delaware courts.
On another legal front, Bank One Corp., the nation's third largest credit card company, sued PayPal in Delaware on Sept. 6 alleging infringement of its patents on an electronic payment system.
The merger may put eBay into competition with itself for awhile since one of PayPal's major competitors is Billpoint, an eBay subsidiary that processes credit card payments for online purchases. Analysts believe eBay will eventually fold Billpoint into PayPal's operations.