AOL bids for eBay stake?
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February 17, 1999: 7:10 a.m. ET
Web firms seen discussing closer ties that could lead to minority ownership
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NEW YORK (CNNfn) - Internet darlings America Online Inc. and eBay Inc. reportedly are considering a closer business relationship that could give the popular Web portal a minority stake in the online auctioneer.
Discussions remain fluid and a direct investment by AOL (AOL) in eBay is indefinite, according to a Wednesday report in The Wall Street Journal. However, the paper reported, AOL executives are very interested in building closer ties between the two companies and are considering a variety of proposals, including jointly developed content.
San Jose, Calif.-based eBay (EBAY) experienced one of the most impressive initial public offerings last year, its stock skyrocketing from an initial offering price of $18. Since then, the company's shares have jumped more than ten-fold, most recently closing at 231-1/8 Tuesday.
With a market capitalization of $9.5 billion, a ten percent stake in the company would cost Dulles, Va.-based AOL $950 million, not including an acquisition premium, the paper noted.
The companies already have a close relationship. As part of a three-year $12 million marketing deal, eBay has more than a 100 links to its site on AOL in areas where collectors (and potential eBay users) are likely to congregate. In return, AOL gets a personalized version of eBay's home page for its members.
A mutual desire to enter local for-sale markets is also driving the latest talks between the two companies, the Journal reported. AOL's Digital Cities service, which lists entertainment offerings on a local basis, could get a boost from eBay's online auctions by offering an alternative to newspaper classified ads. In turn, eBay could use the local AOL platform to target single-city markets.
An alliance between AOL and eBay would also bolster the online auctioneer's position in an increasingly competitive market, the paper said. When eBay was launched in 1995, it was the sole site of its kind. Since then, Yahoo! (YHOO) and others have jumped into the fray, hoping to get a piece of the online auction pie.
Shares of AOL jumped 1 to 159-1/2 on Tuesday.
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