EBay Inc. said it plans to spin off its PayPal
business into a separate publicly traded company next year, taking a page from
the playbook 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, energy and money earlier this year fighting Mr. Icahn
and the premise that eBay would be better as two. It comes as Mr. Icahn has
taken a bigger role within the company and as eBay faces fresh
competition in the payments sector from Apple Inc., which unveiled
this month a new mobile-payment service it hopes will shake up the
industry.
Current eBay CEO John Donahoe and finance Chief
Bob Swan will oversee the separation of the business and may join the boards of
the companies. Devin Wenig, the current president of eBay Marketplaces, will be
the chief executive of the new eBay, while American Express Co. executive
Dan Schulman will lead the new PayPal. Mr. Schulman will immediately take over
as president of PayPal.
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 argued Tuesday that splitting up puts both eBay and
PayPal in better competitive positions, allowing each to focus more keenly on
strategy. Mr. Donahoe said on a call with analysts that eBay transactions
represent less than 30% of PayPal's current total volume, while the company
estimates it will fall to less than 15% in three years.
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 to split off the payments business
from Mr. Icahn, who eventually backed off his demands and agreed to insider
status and an adviser role with eBay.
His firm is eBay's sixth-largest shareholder with about a
2.5% stake, according to FactSet, and he also has a stake of less than 1% in
Apple. Talk of a spinoff at eBay didn't end after Mr. Icahn's shift, however.
Shares jumped in August on reports said the company was discussing a possible
split, two months after then-PayPal President David Marcus left to
join Facebook. Mr. Marcus had been one of the executives battling calls to
split PayPal from eBay. The company said in June that Mr. Icahn played no role
in Mr. Marcus's decision to leave eBay.
After the spinoff, PayPal and eBay said they would look to
continue working together. The companies will also each record one-time charges
related to the move before they split.
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