EBAY Inc’s agreement on Tuesday to spin off PayPal next year will give the unit more flexibility to strike deals in the rapidly evolving payments space as growth at the company’s traditional e-commerce business slows.
The surprise move is a huge about-face for eBay’s leadership, including chief executive officer John Donahoe, who resisted shareholder activist Carl Icahn’s calls for a split earlier this year and led a month-long campaign to convince investors that eBay should remain intact.
Icahn, eBay’s sixth-largest shareholder, eventually backed off in April. But eBay directors and executives shifted their stance on the split in June after a six-month internal study of the payments landscape, he said in an interview.
“We felt like a couple things were changing,” Donahoe said.
“Most notably, the pace of change in this competitive environment, payments and commerce are accelerating and will continue to over the next three to five years.”
By splitting off PayPal, the fast-growing payment division and the new eBay would have “more focus, more flexibility, more agility, more ability to move quickly”, said Donahoe, who will step down as CEO after the spinoff in the second half of next year.
Donahoe and chief financial officer Bob Swan, who will also leave next year, plan to serve on the boards of one or both companies after the split.
eBay will spin off PayPal as a publicly-traded company in a transaction that will be tax-free to shareholders.
PayPal’s next CEO will be Dan Schulman, former head of American Express Co’s online and mobile payment business.
The new eBay will be headed by Devin Wenig, president of eBay marketplaces and former head of the markets division at Thomson Reuters Corp. Reuters