Popular online auction site EBay is set to acquire E-Commerce service provider GSI Commerce for an amount reportedly worth $1.96 billion to strengthen its bid to challenge Web retail company Amazon.

Once implemented, EBay would gain expertise in providing assistance to major retailers in filling up online orders as well as establishing relationships with big toys, electronics, and book sellers which have contributed to Amazon’s growth. On Monday, EBay said that it offered $29.95 in cash for every GSI shareholder, a premium worth 50.9 percent from the closing price of stocks on Friday.

The deal is set to become eBay’s largest acquisition since acquiring Skype for $2.6 billion in 2005. BGC Partners Analyst Colin Gillis declared that it would be one of the few fulfillments that could challenge Amazon.

GSI Commerce’s shares on Nasdaq soared 50.7 percent to close $29.20 while eBay decreased 4.3 percent to close $30.34 as it was concerned that it was paying a lot and might need to make huge investments on GSI’s technology.

GSI serves various establishments such as Aeropostale Inc., Toys R Us, and TJX Cos Inc’s Marshalls. It also runs Rue La La and Shop Runner which provides technology, payment processing, and customer care services for the e-commerce operations of its retailers.

EBay projected its online marketplace to become a $7-8 billion business by 2013, from $5.7 billion last year. On the other hand, Amazon earns over $30 billion worth of sales annually.

While PayPal has contributed to the growth of eBay, it has struggled with other deals, such as its 28.4 percent acquisition of classifieds site Craiglist, which even led to a legal battle after eBay established its own classifieds business.

Under the deal, eBay would sell GSI’s sports merchandise business as well as 70 percent of Rue La La and Shop Runner. The former provides one-day-only Web deals to its members while the latter is a members-only service offering free shipping.

The new holdings would form part of a new firm that would be handled by GSI founder and Chief Executive Officer Michael Rubin. EBay would be lending $467 million to the new company, bringing its worth to $2.4 billion.

Want to earn some spare money as a writer for us? Send us an email!