EBay acquisition provides windfall for VCs

EBay, the US-based internet auction firm, has agreed to acquire Skype Technologies, a privately-held internet telephony provider, for a total up-front consideration of approximately US$2.6bn, which comprises US$1.3bn in cash and the value of 32.4m shares of eBay.

The company was launched just two years ago by Niklas Zennstrom and Janus Friis, founders of online file-sharing service Kazaa, and has been supported through two rounds of funding by venture capitalists Draper Fisher Jurvetson, Index Ventures, Bessemer Venture Partners and Mangrove Capital Partners.

While it is not clear how much the VCs have made from their US$24m investment, shareholders representing approximately 40% of the shares chose to receive a single payment in cash and eBay stock at the close of the transaction. Shareholders representing the remaining 60% of the Skype shares chose to receive a reduced up-front payment in cash and eBay stock at the close plus potential future earn-out payments based on performance-based goals for active users, gross profit and revenue.

Skype generated approximately US$7m in revenues in 2004. It expects to generate an estimated US$60m in revenues in 2005 and more than US$200m in 2006.