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eBay and PayPal are splitting up after 12 years of a convenient marriage in 2002 that had brought together a successful online auction company and an online payment processing business in a match that made good sense at the time.
The companies jointly announced the split Sept. 30, citing that the move “best positions EBay and PayPal to capitalize on their respective growth opportunities in the rapidly changing global commerce and payments landscape, and is the best path for creating sustainable shareholder value.”
Well, there may be more to it than that.
Carl C. Icahn, a hedge fund magnate, has been seeking the breakup of eBay and PayPal since the beginning of the year as a way to raise the value of their stocks, according to a Sept. 30 story by The New York Times. “PayPal was the focus of a lengthy battle between EBay and Mr. Icahn, who demanded a spin-off of the unit as a way to generate value for shareholders,” the story reported. “Such a move, the hedge fund billionaire contended, would highlight PayPal’s own strengths while letting its management team and EBay’s focus on their own core businesses.”
The breakup of the two companies into two separate publicly traded businesses will be completed in the second half of 2015, according to the companies.
“EBay and PayPal are two great businesses with leading global positions in commerce and payments,” eBay President and CEO John Donahoe said in a statement. “For more than a decade EBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value. 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.”
That wasn’t necessarily Donahoe’s position in the past. He had “steadfastly rebuffed” Icahn’s demands to split the two companies up in the past, according to the New York Times report, “arguing that his company reaped benefits from holding onto one of the leading payment processors, and vice versa.”
Donahoe appears to have ultimately lost the fight and the battle to keep the companies together. Now he is rallying the companies and their stockholders to move into the future as separate entities.
“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,” he said in a statement.
Donahoe and eBay CFO Bob Swan will lead the separation of the businesses, which is expected to be completed as a tax-free spin-off, the companies stated.
Under the terms of the pending split, Devin Wenig, the current president of eBay Marketplaces, will become CEO of the new eBay, according to the company. Dan Schulman will be the new president of PayPal, effective immediately, and will be the CEO-designee when the split is completed, the companies said. Schulman comes to PayPal from American Express, where he was president of the company’s Enterprise Growth Group.
eBay currently has some 149 million active buyers and features some 700 million live listings at any given time, according to the company. PayPal has more than 152 million active registered accounts and handles one in every six dollars spent online today, according to the company.