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Owner Of NYSE Approaches eBay And Creates Buying Opportunity

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Intercontinental Exchange (ICE - Free Report) , an unlikely acquirer, has shown interest in the online marketplace giant eBay EBAY. ICE, owner of the New York Stock Exchange, confirmed its interest in buying eBay in a press release at the end of the trading day on February 4th, shooting EBAY shares up almost 10%. ICE stock has traded down over 8% since this news was released.

ICE wants EBAY shareholders to be aware of its interest in the company, as they believe an acquisition would be beneficial to shareholders of both firms. Below is a quote directly from ICE’s press release.

“Over ICE’s 20-year history, the company’s track record of creating shareholder value, both through organic growth and acquisitions, speaks for itself. ICE does look to explore potential opportunities that it expects will deliver enhanced shareholder value and will continue to do so in the future.”

Potential Synergies

A financial exchange and an ecommerce site may sound like an odd couple, but they are more similar than you think. Both of these businesses provide effectively the same essential function, connecting buyers and sellers. The only real difference is that one marketplace is for financial instruments, while the other is for consumer products.

EBAY is looking ripe for a buyout with this stock trading at its lowest forward P/E (12.2x) in over a decade, before ICE’s announcement. It wouldn’t surprise me at all if this global online marketplace has been approached with other offers.

ICE is an acquisition machine, but up until this point, the firm has only been interested in businesses that expand its core competencies, financial data and exchanges. eBay would be an out of the box acquisition for ICE. Analysts & investors are concerned that eBay would not create nearly the same cost synergies as an exchange, and it is vague how this acquisition would further ICE’s move towards becoming a data-driven business.

Founder, Chairman, & CEO Jeffrey Sprecher has a sound track record of successful acquisitions that have created value for his shareholders since the firm was founded two decades ago. Sprecher has pushed ICE’s share price up over 1333% since it went public at the end of 2005.

All the stars would have to align for this deal to go through. This is not the first time ICE has approached eBay, and according to the press release, eBay has not engaged the current offer in a meaningful way. Even if eBay does agree to the acquisition, it is going to take some convincing to get ICE’s shareholders onboard with this acquisition.

Take Away

I have confidence in management’s insight into the matter, and if this does go through, I have faith that this will benefit ICE’s long-term objective. Regardless of what happens, I believe that the share price drop has created a buying opportunity for this financial powerhouse.

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