Online payments firm PayPal is to acquire California-based VeriSign's e-payments processing business for $370m.
The eBay-subsidiary says it will combine VeriSign's payment gateway system - which allows small and medium-sized businesses to accept card payments online - with its merchant platform in a bid to expand PayPal services beyond auction-based transactions.
PayPal says VeriSign's payment gateway business processed more than $40bn in customer transactions last year.
In a statement, Jeff Jordan, president of PayPal, says the payment gateway "perfectly complements PayPal's existing payment services".
"We're very excited about the opportunity to extend the benefits of PayPal's services to the VeriSign customer base. This acquisition allows PayPal to give our customers more choice in payment services and grow our merchant services business even more quickly," says Jordan.
PayPal says the new business is expected to generate an incremental $100 million of revenue in 2006.
As part of the deal eBay has also purchased one million two-factor authentication tokens from Verisign which it willl begin rolling out to PayPal users in 2006. VeriSign's two-factor authentication technology is already used by financial firms including Bank of America and US Bancorp.
Stratton Sclavos, chairman and chief executive officer, VeriSign, says eBay's deployment of two-factor authentication will represent one of the largest consumer authentication deployments in the industry.
Sclavos says the sale of the payments processing business will enable VeriSign to focus on its "core mission of enabling and protecting all forms of digital interactions".
The acquisition is expected to close in the fourth quarter of 2005.