Online auction company Ebay has surprised the Internet community by kicking back and acquiring a 'bricks and mortar' competitor.
Ebay has agreed to acquire San Francisco's largest auction house, Butterfield & Butterfield, for $260 million in stock. The deal is expected to close in the second quarter.
Ebay has been growing rapidly and is one of the few Internet companies that can actually boast that it makes a profit. Yesterday, Ebay said it earned $5.9 million in the first quarter, up 10 fold from last year. Not bad going for a company that is more at home auctioning sports memorabilia, stamps and Barbies, than priceless Warhol art.
Ebay said that it was acquiring the world renowned auction house which specialises in modern art and collectibles to go more up market and move it into the $500 to $5,000 price bracket. Butterfield & Butterfield is the third largest auction house in the world after Sothebys and Christies.
Privately owned Butterfield & Butterfield confirmed that following the Ebay acquisition it has pulled out of a proposed initial public stock offering.
Two weeks ago Ebay and Butterfield said that they would jointly develop an auction site for art and collectibles. During the negotiations Ebay offered to acquire the company.
Initially the companies will stick to the roadmap for their original venture - creating a site called Internationalgallery.com that will enable consumers to live audio and video broadcasts from auction houses and sudmit their bids.
Ebay will not be without competition. Both Christies and Sothebys are set to launch online this year and Amazon.com has also opened an auction service.
Ebay currently has around 6.5 million users.
Source: VNU Newswire
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