EBay’s PayPal Agrees to Buy VeriSign Unit

EBay Inc. said Monday that its PayPal unit had agreed to buy an online-payment processing business from VeriSign Inc. for $370 million.

San Jose-based EBay also agreed to deploy VeriSign technology to increase the security of transactions on the auction site.

Mountain View-based VeriSign’s stock gained more than 4% after the news was announced.

PayPal said VeriSign’s payment gateway business processed more than $40 billion in transactions in 2004 and would add $100 million to the EBay unit’s revenue, and about $20 million to its operating profit, in 2006.

As part of its deployment of VeriSign technology, EBay said it would buy as many as 1 million “authentication tokens” to give to EBay and PayPal customers next year.

Each of the devices displays a six-digit code that a user must type, along with a password, to gain access to a network. The code changes every minute as determined by an algorithm unique to each token.

PayPal spokeswoman Amanda Pires said the company had not determined whether it would charge for the tokens, which could help deter identity theft.

The companies announced their news after the close of regular stock trading Monday. In after-hours trading, VeriSign’s stock jumped as much as 91 cents, or 4.5%, to $20.95.

In regular trading, VeriSign rose 11 cents to $20.04, while EBay climbed 56 cents to $40.46. EBay moved little after hours.

The payment gateway acquisition, which is subject to regulatory approval, is expected to close in the fourth quarter.