Weak share price kills GSI's Innotrac deal, may lure buyers

GSI Commerce, King of Prussia, and Innotrac, Atlanta, which fill orders for online retailers, cancelled their October merger agreement today without giving a reason (and no break-up fee.) The trouble was clear to analysts:

"The termination is based on GSI trading below" the target price of $11.12 a share in January, wrote Janney Montgomery Scott LLC analyst Shawn C. Milne in a report. That's a "positive event given the current environment" and the need to "preserve capital."

Killing the deal "improves liquidity... We remain cautious on the 2009 outlook given the macroeconomic backdrop," wrote Susquehanna Financial Group LLLP analysts Marianne Wolk and Malindi Davies. GCI itself "is an attractive acquisition candidate at these levels," they added.

GSI fills orders for Toys R Us, Polo Ralph Lauren Corp. and the NFL, among others. Innotrac clients include Target Corp., North Face, Kay Jewelers and NBC. The combined company would have had 4,000 workers (or nearly 10,000 in the Christmas rush) and rivaled Amazon.com as an online shipping-and-call center, ceo Michael Rubin said when he announced the deal last fall.