October 6, 2008, 12:00 AM

GSI Commerce to buy fulfillment and customer service vendor for $52 million

E-commerce platform provider GSI Commerce is buying Innotrac Corp., an e-commerce fulfillment and customer service vendor, for $52 million in cash and stock. The acquisition is expected to close in the first half of 2009.

Katie Evans

Managing Editor, International Research

 

E-commerce platform provider GSI Commerce is buying Innotrac Corp., an e-commerce fulfillment and customer service vendor, for $52 million in cash and stock. The acquisition is expected to close in the first half of 2009.

 

GSI says the purchase will boost its client base and expand its North American operations. With the acquisition, GSI will manage 4.7 million square feet of fulfillment centers and 2,165 call center seats. GSI intends to use Innoctac’s Nevada-based fulfillment center to offer regional fulfillment services starting next year. The boards of directors for both companies have approved the purchase.

 

Under the agreement, GSI will pay $22 million in cash and $30 million in stock, or 1.84 million shares at $16.29 per share of GSI common stock, for Innotrac. GSI also will take on $61.9 million in Innotrac debt.

 

Innotrac operates seven fulfillment facilities in Georgia, Illinois, Kentucky, Nevada and Ohio, and one customer service center in Colorado. As of June 30, the business had gross property and equipment worth $49.9 million and net property and equipment valued at $17.0 million. For the 12 months ending June 30 Innotrac posted net revenues of $128.2 million, operating income of $4.5 million and non-GAAP income from operations of $9.1 million.

Innotrac serves more than 30 businesses in the retail, telecommunications and direct marketing industries. Retail clients accounted for the largest portion of the company’s 2007 sales and include apparel, beauty, home, jewelry, entertainment, technology, toys and general merchandise businesses.

 

“Innotrac furthers our leadership position in e-commerce and multi-channel services by bringing new clients, enhancing our scale for fulfillment and call center services and adding to our available capacity to support growth of new and existing clients,” says Michael G. Rubin, chairman and CEO of GSI. “Regional fulfillment will enable our clients to deliver packages to their customers more quickly while saving money on delivery costs. This is a key part of our strategic focus of enhancing the consumer shopping experience.”

 

The deal is subject to approval of Innotrac stockholders as well as the U.S. District Court for the Northern District of Ohio of a settlement agreement between Innotrac and the court-appointed receiver of the IPOF Fund, L.P., which holds approximately 35% of the outstanding shares of Innotrac.

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