eBay 2003 Annual Report Download - page 104

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (CONTINUED)
losses in the non-operating section of our consolidated income statement. We have accounted for the
acquisition of the additional common shares using the purchase method of accounting and accordingly, the
purchase price has been allocated to the percentage of the acquired intangible assets and a reduction in the
minority interest liability on the basis of their respective fair values on the acquisition date.
EachNet, Inc. Acquisition
On March 17, 2002, we acquired an approximate 38% interest in the outstanding common stock of
EachNet, Inc. (""EachNet''), which was an approximate 33% interest on a fully diluted basis, in a
purchase acquisition for $30.0 million in cash. EachNet provides an online marketplace for the trading of
goods and services for both individual and business customers in the People's Republic of China. We
accounted for our investment using the equity method of accounting and the total investment, including
identiÑable intangible assets, deferred tax liabilities and goodwill, was classiÑed on our balance sheet as a
long-term investment.
In July 2003, we completed the acquisition of all of the remaining outstanding capital stock of
EachNet. The total purchase price was $144.9 million and comprised of approximately $143.3 million in
cash and $1.6 million in acquisition related expenses. Under the terms of the transaction, $104.9 million of
the cash amount was paid at closing and the remaining $38.4 million was paid on March 1, 2004. We have
accounted for the acquisition of the remaining outstanding capital stock as a purchase and, accordingly, the
purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed on
the basis of their respective fair values on the acquisition date. The valuation of the identiÑable intangible
assets acquired was based on management's estimates using a valuation report prepared by an independent
third-party.
The Ñnal allocation of the purchase price will depend upon our Ñnal determination of the fair value of
the net assets acquired, the liabilities assumed, and the total acquisition related expenses. The results of
operations for EachNet during periods prior to our acquisition of the remaining ownership interest were not
material to our consolidated results of operations and, accordingly, pro forma results of operations have not
been presented.
PayPal, Inc. Merger
Overview
On October 3, 2002, we acquired a 100% interest in PayPal, Inc. in a tax-free, stock-for-stock
transaction. PayPal provides a global payments platform and is headquartered in Mountain View,
California. We acquired PayPal to provide a signiÑcantly improved customer experience to eBay's users by
making their trading experience easier, safer, and faster. The PayPal Ñnancial results are included herein
for periods subsequent to our acquisition date.
The purchase price reÖected the issuance of approximately 47,650,000 shares of our common stock to
PayPal stockholders using a Ñxed exchange ratio of 0.39 shares of our common stock for each PayPal
share of common stock outstanding on October 3, 2002, assuming retroactive eÅect of a split of PayPal's
stock corresponding to our two-for-one stock split. In addition, we assumed PayPal's outstanding stock
options. The fair value of the shares of our common stock issued and PayPal options assumed is based on
a per share value of $28.96, which is equal to our weighted average closing share price for the Ñve trading
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