eBay Inc., the San Jose-based online auction giant, says it will pay $29.25, a share, or $2.5 billion, to buy Michael G. Rubin's King of Prussia-based GSI Commerce Inc. and its marketing-services unit, which manages online sales for Dick's Sporting Goods and hundreds of other retailers.
Update: GSI will remain in King of Prussia under Chris Saridakis, hired as its marketing-services chief last year, eBay spokeswoman Amanda Coffee told me. Her bosses told investors the company plans to save $40 million by cutting "corporate overlap" after the merger. Coffee won't say how many will lose their jobs. eBay announcement here.

GSI's headquarters is in King of Prussia, but it ships through plants in Kentucky and other states. eBay will keep seven of GSI's nine warehouse centers, with Rubin keeping Jacksonville-based Fanatics' operation and a second, unidentified location. 

Rubin, a Lafayette Hill native and Villanova U drop-out, will buy back controlling shares of three GSI units: the Fanatics sports merchandising business, plus majority stakes in GSI's ShopRunner free-shipping service and its Rue La La retail shopping subsidiary. Rubin will pay eBay $31 million, and eBay will lend his company $467 million, in exchange for those three.
Why leave those three on the table? Fanatics competes with existing eBay customers; and Rubin can likely grow the other two units faster than eBay could, eBay boss John Donahue told investors in a conference call.
eBay's price is about 50% higher than what GSI shares have fetched in recent weeks, but less than the company's 2010 high of $31 a share. Major investors include Wells Fargo, Artisan Partners of Milwaukee, Fred Alger Management, Goldman Sachs, and Vanguard, among others, along with Rubin, who owns 4.3 million shares, or about 6.4% of the company, worth more than $130 million at eBay's price. Earlier investors like Softbank and John Malone's Liberty Media cashed out previously.

eBay officials said the group they're buying will be run as a separate unit, at least for 2011, by Chris Saridakis, head of GSI Marketing Services since joining GSI last year. eBay boss John Donahue says GSI will especially help connect large merchants to shoppers who are using smartphones to place their orders.

"We're focused 100% on growing the business, and cutting whatever expenses we can," Saridakis said. Saridakis was previously a boss at local-news publisher Gannett and its Conshohocken-based PointRoll ad agency, and at the pioneering DoubleClick online ad service group. - Philadelphia-based law firm Morgan Lewis & Bockius advised GSI in the deal.