eBay

(EBAY) - Get Report

will acquire online payment service

PayPal

(PYPL) - Get Report

, a popular means of payment for its auction system, for stock worth about $1.5 billion.

The deal would end PayPal's life as an independent publicly traded company about five months after it began. The company went public last February at $13 a share, and since has traded as high as $30.48. Shares were recently up about 10% to $21.98 in premarket trading on Instinet.

eBay will offer 0.39 shares for each PayPal share, valuing PayPal at about $23.61 a share based on eBay's Friday closing price, although eBay lost about 7.5% of its value on Instinet after announcing the transaction. Using the Friday quote, the price represents almost a $4 premium to PayPal's Friday close of $20. eBay added that the final purchase price will include about $18 million in acquisition-related costs.

In a press release, eBay said the deal was a natural extension of its trading platform. "Payment is a vital function in trading on eBay, and integrating PayPal's functionality into the eBay platform will fundamentally strengthen the user experience and allow buyers and sellers to trade with greater ease, speed and saftety," the company said.

eBay added that the deal will be immediately accretive to its pro forma earnings, but the company will incur acquisition-based charges of about $4 million and $9 million per quarter. As part of its announcement, eBay released its current quarter financial results, saying it earned 19 cents per share on a pro forma basis on revenue of about $266 million, slightly ahead of its previous guidance and above Wall Street's consensus forecast of 17 cents on revenue of about $264 million, according to Thomson Financial/First Call.

PayPal will continue to operate as a separate service after the merger, with eBay phasing out its current eBay Payments by Billpoint service. 60% of PayPal's business comes from eBay users, with the other 40% coming from small merchants, which eBay plans to target as a new potential revenue-generating audience.