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Toys ‘R’ Us Pulls the Plug: A Big Blow to eBay Enterprise

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Client Toys “R” Us is pulling the plug

According to a recent report from The Wall Street Journal, Toys “R” Us, a main customer of eBay Enterprise, has decided to oversee its own e-commerce operations. The announcement comes at a very crucial time for eBay (EBAY) as the company prepares to split from PayPal on July 17.

For quite some time, eBay has been exploring strategic alternatives for eBay Enterprise, including a full or partial sale or IPO (initial public offering). The company has been in discussions with a few potential suitors, including private equity firms Thomas H. Lee Partners, Apax Partners, and Sterling Partners.

Thomas H. Lee Partners is likely to purchase eBay Enterprise with a price range of $800 million to $1 billion. Earlier this year, eBay announced the deal will be formalized by July 15, a day before its second quarter earnings release and its split from PayPal.

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Growth of eBay Enterprise ups its pace in last two quarters

As you can see in the above chart, eBay Enterprise’s revenues didn’t grow much in earlier quarters. eBay Enterprise helps traditional retailers develop and maintain online shopping sites. It also provides a variety of services such as marketing, customer care, and payments processing to these clients. Some of its clients are IKEA, iRobot (IRBT), Dick’s Sporting Goods (DKS), and RadioShack (RSH).

For a diversified exposure to eBay, investors can consider ETFs such as the SPDR S&P 500 (SPY). This ETF invests in the 500 largest US companies. The technology sector makes up 18% of the fund’s portfolio.

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