EBay, PayPal to split up

EBay (NASDAQ:EBAY) plans to spin off its PayPal unit into a separate publicly traded company in the second half of 2015. Activist hedge fund magnate Carl Icahn demanded the divesture around nine months ago, but the idea was originally rejected by eBay's board and president, CEO John Donahoe.

"For more than a decade, eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value," Donahoe said in a company statement. "However, a thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively. The industry landscape is changing, and each business faces different competitive opportunities and challenges."

Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay company, leading the eBay Marketplaces and eBay Enterprise businesses. Revenue over the last twelve months for these two businesses grew approximately 10 percent year-over-year to $9.9 billion, with eBay Marketplaces accounting for about $8.7 billion. 

In addition, eBay hired Dan Schulman, who was president of American Express's Enterprise Growth Group, as PayPal's new CEO-designee, after the separation is complete.

The subsequent separate companies of eBay and PayPal will be "sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets," according to Donahoe. "As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities. And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward. Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders."

Donahoe–and eBay's board–have come a long way since they disagreed with Icahn, who said spinning off PayPal would highlight PayPal's strengths while letting eBay focus on its core businesses. Plus, Icahn argued, creating a separate board for PayPal could help remove conflicts of interest with eBay.

At the time, Donahoe rejected Icahn's demands. "We and our board believe the best way to drive long-term shareholder value is to keep eBay and PayPal together, to capitalize on the opportunities," he said on an analyst call in January. "And the distraction and dis-synergies of separation would be happening exactly at the wrong time. We're in this window of opportunity of commerce."

For more:
-See this eBay press release
-See this New York Times article

Related stories:
Walmart, Amazon, eBay top customer survey
Former Crate & Barrel CEO dies at 71, eBay exec to become CEO of LivingSocial
EBay partners with Sotheby's to host online auctions
EBay expands click & collect to 650 stores
EBay denies firing PayPal president