EBay to Spin Off PayPal Business Activist Carl Icahn Pushed Similar Plan for Online Marketplace
EBay CEO John Donahoe, who will lead the separation, had opposed such a split when activist Carl Icahn proposed the move. AFP/Getty Images EBay Inc. EBAY -0.51% said it plans to spin off its PayPal business into a separate publicly traded company next year, a victory for activist investor Carl Icahn, who had pushed for the company to split.
EBay said Tuesday that it expects to complete a tax-free spinoff of PayPal during the second half of next year.
Devin Wenig, the current president of eBay Marketplaces, will be the chief executive of the new eBay, while American Express AXP -0.48% executive Dan Schulman will lead the new PayPal. Mr. Schulman will immediately take over as president of PayPal, eBay said.
Current eBay CEO John Donahoe won't have an executive role in either new company, nor will finance chief Bob Swan. Both executives, however, will oversee the separation of the businesses.
"For more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value," Mr. Donahoe said in a news release. "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."
He added: "The industry landscape is changing, and each business faces different competitive opportunities and challenges."
Mr. Donahoe and the company's board had said earlier this year that they believed the company would be stronger with PayPal in the fold. They were responding to a push from Mr. Icahn to split off the payments business, whose revenue has been on pace to soon eclipse that of eBay's legacy business.
Mr. Icahn eventually backed off his demands to split the company and eventually agreed to insider status at eBay. In August, he disclosed that he boosted his position in eBay.
His firm is eBay's sixth-largest shareholder with about a 2.5% stake, according to FactSet.
Talk of a spinoff didn't end after Mr. Icahn's shift, however. EBay's shares jumped in August when a media report said that the company was discussing a possible spinoff, two months after then-PayPal president David Marcus left to join Facebook. FB +0.27% Mr. Marcus had been one of the executives battling calls to split PayPal from eBay.
The announcement Tuesday also comes as PayPal faces fresh competition from Apple Inc.'s new Apple Pay service, which is focused on the growing mobile-commerce segment. Analysts have characterized the Apple Pay launch as a threat to PayPal.
PayPal has more than 152 million active registered accounts, while revenue over the past 12 months grew by 19% to about $7.2 billion.
EBay bought PayPal in 2002 for $1.4 billion in stock.