August 20, 2002 1:55 PM PDT
eBay-PayPal deal clears federal scrutiny
The Justice Department has closed its investigation into the acquisition, department spokeswoman Gina Talamona said. She declined to say whether the department made a second request for information from the companies before ending the investigation.
But eBay and PayPal said on Tuesday that they had not received any formal request from the Justice Department for additional information.
Under federal antitrust law, the Justice Department had until Monday to request more information on the merger or to begin seeking to block it.
"We always believed that the merger would be approved by the government," PayPal spokesman Vince Sollitto said. "We're certainly pleased that the process continues to move forward."
eBay representatives did not return calls seeking comment.
eBay agreed in July to acquire PayPal, proposing to exchange 0.39 eBay shares for each outstanding share of PayPal stock. The deal would combine the dominant auction site with the leading online payments company. At current prices, the deal is worth about $1.4 billion.
In regulatory documents filed earlier this month, eBay and PayPal said the merger had drawn scrutiny from Justice Department officials who had made an initial request for information about the deal. PayPal also disclosed in the filings that prior to announcing the deal that it had met with federal regulators to discuss eBay's allegedly anti-competitive practices.
The deal has several more legal and regulatory hurdles to clear before the companies finish it. The shareholders of both companies must approve the deal, for instance. PayPal plans to send a proxy statement out to shareholders detailing the agreement and asking them to vote on it "shortly, within weeks," Sollitto said Tuesday.
Meanwhile, PayPal is in the process of requesting that its money transmitter licenses--which many states require of companies such as Western Union that transfer money electronically from one individual to another--be transferred over to eBay's name once the deal is completed, Sollitto said. Both PayPal and Billpoint, eBay's current online payments service, have drawn scrutiny from state banking and financial regulators, who have questioned whether the services are operating as unlicensed money transmitters or even illegal banks.
eBay and PayPal also face a series of lawsuits filed on behalf of shareholders that seek to block the merger. The suits charge PayPal's management with breaching its fiduciary duties and that the price eBay is paying for the company is unfair and inadequate.
Meanwhile, the companies have filed notices of the impending merger with antitrust regulators in Brazil and Germany. Sollitto didn't know the status of those inquiries.