New York (AFP) – U.S. online auction giant eBay on Tuesday announced plans to spin off its PayPal unit, a move designed to help it compete better in the fast-moving online payments segment.
The plan, to take effect next year, comes after months of pressure from activist investor Carl Icahn, who had assailed eBay for poor management and claimed that keeping eBay tied with PayPal depressed the value of both units.
An eBay statement said that a board review concluded that “a changing competitive landscape creates enormous opportunities for eBay and PayPal” and that “separation will create sharper strategic focus and better position each business to capitalize on those growth opportunities as independent companies.”
Company president and chief executive John Donahoe said that “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 move comes with the online payments segment facing new challenges from the likes of Apple, which introduced a mobile payments platform using its iPhones, and newcomers such as Square.
“The pace of industry change and innovation in commerce and payments requires maximum flexibility to stay competitive and drive global leadership,” the eBay statement said.
Current eBay shareholders will receive stock in the future PayPal in proportion to their current holdings, the company said in a statement.
The split will give shareholders “more targeted investment opportunities” and will increase the value of the company over the long term, the statement said.
PayPal accounted for 41 percent of eBay’s revenues last year and has more than 152 million active users.
Donahue and chief financial officer Bob Swan will lead the transition of both businesses, the statement said. But they will not hold executive management roles in the two new companies.
The “new” eBay will be led by Devin Wenig, current president of eBay Marketplaces.
The independent PayPal will be headed by Dan Schulman, who comes from American Express after holding top jobs at AT&T, Priceline, and Virgin Mobile.
eBay acquired PayPal in 2002 for roughly $1.5 billion in shares, integrating the payment service that had already been widely used for online auctions.
AFP Photo/Justin Sullivan