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Mike Blake

EBay Inc. plans to buy e-commerce company GSI Commerce for $1.96-billion in cash in a bid to draw more buyers and sellers to its online marketplaces.

EBay said Monday it offered GSI shareholders $29.25 per share, a 50.9-per-cent premium over its closing price on Friday. Shares rose by the same amount in Monday's Nasdaq trading. EBay shares were down 3 per cent.

GSI owns Web businesses such as Rue La La, which offers one-day-only deals to its members, and ShopRunner, a members-only online shopping service that offers free shipping. GSI also provides technology, payment processing and customer care services for e-commerce sites.

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In a statement, EBay chief executive officer John Donahoe said the deal would help the company connect more buyers and sellers.

EBay said the acquisition, expected to close in the third quarter of 2011, would have little effect on its fiscal 2011 adjusted earnings forecast, and would add to 2012 earnings. EBay said the deal would hurt 2011 profit by 30 cents to 34 cents per share.

As part of the deal, EBay will sell off GSI's licensed sports merchandise business and 70 per cent of ShopRunner and Rue La La, which will all become part of a new holding company run by GSI's founder and chief executive Michael Rubin.

EBay will lend Mr. Rubin's new company $467-million. Including the loan, eBay said the deal was worth $2.4-billion.

EBay said those business were not important to its long term growth strategy but it will keep a 30-per-cent stake in both Rue La La and Shop Runner.

GSI has until May 6 to solicit bids from other parties during the so-called "go shop" period.

EBay has pointed to its PayPal payments processing unit as its prime growth driver in recent years.

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But it is also trying to spark growth at its more familiar marketplaces unit, a high-margin business that connects online buyers and sellers.

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