EBay will spin off its PayPal business into a separate publicly traded company in 2015.
Retweet (WSJ) - EBay Inc. said today it plans to spin off its PayPal electronic-payments business into a separate publicly traded company next year, acceding to the wishes of activist investor Carl Icahn who had pushed for the company to split.
The decision marks a sharp reversal for a company that spent a lot of time and money earlier this year fighting Mr. Icahn and the premise that eBay would be better divided. Now, eBay is employing many of the same arguments Mr. Icahn made in urging the split, saying, for example, that it would enable management to better focus on emerging challenges and opportunities and free PayPal to more easily reach agreements with companies that compete with eBay's online marketplace.
The payments landscape is changing rapidly, and Apple Inc. unveiled this month a new mobile-payment service it hopes will shake up the industry further. Also changing is eBay's leadership as Chief Executive John Donahoe steps down as CEO.
Mr. Schulman is a former Sprint Nextel executive and chief executive of Priceline.com, the discount travel website. He joined American Express in 2010 to lead the company's expansion into alternative forms of payment. There, he headed a new unit called the Enterprise Growth Group, which invested in companies focused on serving digital commerce.
Investors appeared to approve of news of the split, as shares of eBay jumped 7.4% to $56.57 in midday trading Tuesday, giving it a market value of about $65 billion. Gene Munster, a Piper Jaffray analyst, estimated the combined value of the PayPal and eBay is $62 per share.
PayPal has been on pace to overtake eBay's core marketplace by sales. In the June quarter, the payments unit boosted sales 20% to $1.95 billion and added 4.1 million new active customers from the first quarter, to 152.5 million. PayPal facilitates one in every six dollars spent online, eBay said. At its namesake marketplace, revenue rose 9% to $2.17 billion as the number of active accounts increased by 3.8 million to 148.9 million.
EBay bought PayPal in 2002 for $1.4 billion in stock. After the spinoff, PayPal and eBay will continue working together, the company said, with Robert Swan, eBay's finance chief, adding that both will have strong balance sheets. EBay plans to hold on to its current $7.5 billion in debt.
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