Share

EBay plans PayPal spinoff in 2015

New York - EBay said it would spin off PayPal, its fast-growing payments business, into a publicly traded company in the second half of 2015, marking an about-face for the company.

The news of the tax-free spinoff to shareholders sent eBay's shares up 10% to $58.15 in premarket trading.

EBay chief executive John Donahoe had previously resisted demands by activist investor Carl Icahn to hive off the service, saying PayPal was integral to eBay's business, and vice versa.

Icahn, eBay's sixth-largest shareholder with a 2.48% stake as of June 30, backed off from his demand in April. He also withdrew his two nominees to eBay's board, but in a concession, the company added a 10th independent director.

Donahoe acknowledged in an interview with the New York Times on Tuesday that eBay was following Icahn's recommended strategy. But he contended the company arrived at its conclusion through "a deliberate process" and not by reacting to outside pressure.

"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," Donahoe said in a statement.

EBay said revenue in its marketplaces and enterprise businesses increased 10% to $9.9 billion in the last four quarters, while PayPal's revenue rose 19% to $7.2bn.

"By separating marketplace and PayPal, it could make marketplace more attractive as an acquisition, which is something that investors have been thinking about since Alibaba's IPO," PiperJaffray analysts wrote in a research note.

After the spinoff, the new eBay will be headed by Devin Wenig, president of eBay marketplaces and former head of the markets division of Thomson Reuters Corp.

PayPal's chief executive after the spinoff will be Dan Schulman, former head of American Express Co's online and mobile payment business.

EBay's CEO Donahoe and chief financial officer Bob Swan will oversee the separation and serve on the boards of both companies.

The PayPal business faces competition from Google Inc's Google Wallet and a number of other vendors. Apple Inc is scheduled to enter the online payments market next month with its newly unveiled service, Apple Pay.

"On PayPal, investors will still contemplate the risk of PayPal directly competing with Apple Pay and Google Wallet, which will likely add some uncertainty to PayPal's standalone valuation," PiperJaffray analysts said.

EBay had a market value of $65.36bn as of Monday's close.

PayPal was founded in the late 1990s and went public in 2002. It was acquired by eBay soon afterward for $1.5bn.

PayPal has more than 152 million active users and accounts grew 15 percent last quarter.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.9%
Rand - Pound
24.10
-0.9%
Rand - Euro
20.59
-0.7%
Rand - Aus dollar
12.42
-0.9%
Rand - Yen
0.13
-0.8%
Platinum
915.75
-0.8%
Palladium
1,028.36
-3.5%
Gold
2,159.96
+0.2%
Silver
25.03
-0.6%
Brent Crude
85.34
-0.1%
Top 40
66,252
0.0%
All Share
72,431
0.0%
Resource 10
53,317
0.0%
Industrial 25
100,473
0.0%
Financial 15
16,622
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders