eBay Inc. and VeriSign Inc. Monday said they had agreed to a strategic alliance that calls for the two companies to collaborate on payment services and security for e-commerce.
VeriSign shares rose 5.2 percent to $21.08 in after-hours trade following announcement of the wide-ranging deal.
Under terms of the agreements, eBay's PayPal, the largest online payments company, will pay about $370 million in cash and/or stock to buy VeriSign's payment processing gateway business and combine it with PayPal's merchant services.
VeriSign, a top supplier of online security software, also will provide eBay and PayPal with a suite of security services that includes use of so-called "two-factor authentication," a security system that gives customers a one-time password to help protect against online identity theft.
EBay, one of the world's top e-commerce brands, together with VeriSign also said they have signed a multi-year security technology deal. This calls for eBay to make use of VeriSign technologies to help protect online transactions, including the purchase of up to one million "two-factor" identity tokens.
PayPal said the acquisition of VeriSign's payment software system -- which processed more than $40 billion in payment volumes during 2004 -- will help the company accelerate its push into the merchant services market. VeriSign counted tens of thousands of small and medium-sized business customers.
The payment gateway works instantaneously and on a broad scale to give merchants a way to authorize, process and manage online payments, the companies said in a statement. The additional payment system expands the range of processing choices available via PayPal it said.
As a result of the deal, PayPal said the payment gateway business is expected to generate an incremental $100 million of revenue for it in 2006.