eBay Inc. (NASDAQ:EBAY) today announced that it has reached a definitive agreement to acquire Bill Me Later®, the number two online-oriented payments brand, for approximately $820 million in cash and approximately $125 million worth of outstanding options, net of option exercise proceeds. The acquisition extends the company’s leadership in payments by combining Bill Me Later with eBay’s PayPal, the number one online-oriented payments brand. Subject to various closing conditions, the deal is expected to be completed by year-end.

“Bill Me Later is a perfect complement to our portfolio; PayPal and Bill Me Later belong together,” said John Donahoe, eBay Inc.’s president and chief executive officer. “We now have a powerful combination of the two leading, complementary online payment products, each with proven benefits for consumers and online merchants. At an attractive valuation, our investment in Bill Me Later opens significant long-term growth opportunities.”

The deal offers strong synergies within the eBay portfolio. Bill Me Later can offer its deferred payments and promotional financing service to the tens of millions of customers who use eBay and PayPal. PayPal expands its customer base to approximately 1,000 of the most popular Web sites and to the millions of online shoppers who use Bill Me Later.

“Bill Me Later is a fabulous business, and the opportunity that eBay, PayPal and Bill Me Later have together is nothing short of tremendous,” said Scott Thompson, president of PayPal, who will oversee both businesses. “By combining the best of PayPal and Bill Me Later, we can offer an even stronger service for consumers and merchants.”

Together, PayPal and Bill Me Later can better meet consumers’ needs both on and off eBay by allowing them to quickly, safely and easily purchase the items they want online and pay for them immediately or over time. With one payment relationship, retailers and eBay sellers can offer two of the Web’s most innovative payment methods, which have been proven to increase sales and deliver higher average selling prices for merchants.*

Founded in 2000 by a team of seasoned professionals in the payments industry, Bill Me Later enables online retailers to offer transactional credit to consumers at the point of sale. With its sophisticated underwriting techniques and credit decision model, Bill Me Later provides approval decisions for shoppers within seconds without requiring them to complete detailed application forms.

Bill Me Later’s credit risk modeling and analysis have consistently performed better than the consumer credit industry average. Combined with eBay’s and PayPal’s best-in-class transactional data monitoring, this expertise will bolster the company’s ability to drive down risk in the payment system and provide customers with even safer, faster ways to pay online.

“PayPal and Bill Me Later have a similar vision to dramatically streamline and improve the experience for customers shopping online,” said Gary Marino, chief executive officer of Bill Me Later.