PayPal To Acquire Fraud Sciences To Improve Risk Management

PayPal reported Monday that it has offered $170 million in cash to acquire Fraud Sciences Ltd., an Israeli company that develops online risk and security tools.

PayPal, a unit of eBay, will use Fraud Sciences' technology to enhance the fraud management systems of both PayPal and eBay. The Israeli firm's risk tools and analytics also will be targeted at accelerating the development of advanced fraud detection tools.

Founded by former Israeli intelligence experts, Fraud Sciences has been able to sort out legitimate bidders from suspicious bidders and in the process makes it possible for sellers to be able to clear additional legitimate bidders to participate in online transactions.

"Integrating Fraud Sciences' risk tools with PayPal's sophisticated fraud management system should allow us to be even more effective in protecting eBay and PayPal's hundreds of millions of customers around the world," said Scott Thompson, PayPal's president, in a statement.

Key Fraud Sciences executives will join PayPal's technology and management teams. The are: founders Shvat Shaked and Saar Wilf. In addition, Fraud Sciences' president and CEO Gadi Maier will provide strategic and operational support to the company during the integration period.

Fraud Sciences has been financed by venture capital firms BRM Capital and Redpoint Ventures as well as by additional U.S. and Israeli investors.

The companies say they expect the deal to close within the next 30 days. eBay said doesn't expect the deal to have a material impact on its 2008 earnings.