Google Buying eBay For $85 Billion Makes Sense: Stifel

Google Buying eBay For $85 Billion Makes Sense: Stifel

Equity research firm Stifel published a research report on eBay Inc (NASDAQ:EBAY) on Friday, May 16th. In the report, Stifel analyst Jordan A. Rohan and colleagues suggest that the rumor of a mega-merger between Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) and eBay is not to be too quickly dismissed. Rohan et al, however, emphasize that they know of no ongoing negotiations between the two companies.

Play Quizzes 4

Internet sector mega-merger is possible

According to the Stifel report, the Google-eBay deal is not just pie-in-the-sky and “does have real merit.” Rohan et al highlight slippage in Paypal growth expectations and a “material deceleration in growth in the marketplace division as structural issues facing eBay management.

They goes on to suggest that lowered future expectations for eBay Inc (NASDAQ:EBAY) could be a catalyst for the sale of the company and that Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) is now structured for a mega-deal. “Any additional reduction in expectations could mitigate eBay’s appeal to some buyers. We believe eBay management is aware of this challenge and may look for a graceful, shareholder-friendly exit. Google’s issuance of non-voting GOOG Class C shares make the potential for a merger higher than in prior years, as the Google founders would not face dilution in voting control through a mega-deal.”

London Value Investor Conference: Joel Greenblatt On Value Investing In 2022

The first London Value Investor Conference was held in April 2012 and it has since grown to become the largest gathering of Value Investors in Europe, bringing together some of the best investors every year. At this year’s conference, held on May 19th, Simon Brewer, the former CIO of Morgan Stanley and Senior Adviser to Read More

Finally, Rohan and colleagues also mention the growing possibility of Alibaba eventually claiming a chunk of eBay’s share of the online marketplace may also “translate into an increased willingness by eBay executives to consider a transaction at this point in time.”

Valuing a possible deal between Google and eBay

Valuing this kind of a major deal is no easy task, but the Stifel analysts back of the envelop calculations suggest a price north of $85 billion.

Given that eBay Inc (NASDAQ:EBAY) shares currently trade around 9.6 times 2015 EBITDA, if eBay were pegged at $66 per share in a buy out, as per Stifel’s current sum-of-parts analysis, that would mean an overall 2015 EBITDA multiple of 12.5X. This multiple is well within the reach of Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), as it is roughly ballpark with Google’s overall multiple after taking cost synergies into account. Google is trading at around 11.0X 2015 EBITDA today.

ebay rating

Updated on

No posts to display


  1. Google buying the rusting old scow, eBay, for $85 billion makes as little sense as MasterCard or Visa buying eBay’s “PreyPal” operation, and that is never going to happen …

Comments are closed.