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CMGI buys uBid for $407M
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February 10, 2000: 2:20 p.m. ET
Web incubator to buy online business and consumer auction site
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NEW YORK (CNNfn) - Internet investment company CMGI Inc. said Thursday it will buy Web auction site uBid.com for about $407 million in stock.
Under the deal, CMGI (CMGI: Research, Estimates) will issue 0.2628 share for each uBid.com (UBID: Research, Estimates) share. That's equal to about $31.67 based on Wednesday's prices, a 19 percent premium over uBid's close of about $26.69. CMGI closed Wednesday at 120-1/2.
Ubid.com operates business-to-consumer and business-to-business (B2B) online auctions of computers, consumer electronics, apparel, housewares, jewelry and other items.
Andover, Mass.-based CMGI said it plans to boost uBid.com traffic and revenue by using other CMGI properties such as MyWay.com, iCAST, yesmail.com and AltaVista. It also will expand the site's inventory and product fulfillment services.
The companies said they expect to use uBid.com's online merchandising and inventory management technology and services for CMGI-owned e-commerce companies.
The acquisition is subject to regulatory and uBid shareholder approval and is expected to close in May.
uBid differs from consumer-to-consumer auction sites such as eBay (EBAY: Research, Estimates) by offering for bidding brand-name products that come directly from manufacturers, including Sony, IBM, Hewlett Packard, Canon and Epson.
While eBay doesn't compete in the same space as uBid, other than offering products for auction, Martin DeBono, online auction analyst at Gomez Advisors in Lincoln, Mass., said he has received many calls from Internet watchers who wonder if eBay will move into the business-to-consumer arena.
"I don't think eBay is going into B2B," DeBono said. "They have a large number of buyers and sellers on the consumer side, and to add B2B is not that easy. They have a tremendous consumer brand already."
uBid will launch its business-to-business auction site in the coming months and said it will provide corporate and small businesses with products and services such as office supplies and insurance.
"Online auctions, both B2C (business-to-consumer) and B2B, are one of the fastest-growing areas of the Internet," David Wetherell, CMGI chairman and CEO, said.
"We believe there's tremendous opportunity in applying these techniques to CMGI's existing e-commerce companies, and in building aggressively to extend these technologies into the emerging B2B marketplace through licensing and other channels," he added.
According to Internet auction experts, the field is growing increasingly competitive. DeBono said Gomez predicts that total merchandise sales from Net auction sites will bring in more than $9 billion this year, double 1999's figure of $4.5 billion.
Banc of America's Internet retail analyst Tom Courtney recently issued a report that also foresees a substantial increase in the market.
"Worldwide Internet retail sales were almost $23 billion in 1999 and we expect that to double in 2000," Courtney said. "Street estimates for worldwide sales in 2002 are approximately $105 billion, with $65 billion of that in the U.S. This implies an annual growth rate of 80 percent worldwide."
Courtney said that within the small-cap sector for Internet retailers, he recommended uBid with a "strong buy" rating, since he felt the company was a pioneer in the B2C auction area and likes its expansion into B2B. 
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CMGI
uBid
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