The largest online marketplace – eBay Inc. revealed in a statement today that it intends to spin off its payments unit PayPal next year, turning it into a separate entity. The company finally gave in to pressure from activist shareholder Carl Icahn who had been pushing for a split for the past nine months.
The Chief Executive Officer of eBay – Mr. John Donahoe said in a news release, which was cited by the Wall Street Journal: “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.”
EBay said that separating the businesses will allow each one of them to become more concentrated on their opportunities to create a satisfactory shareholder value.
During the quarter ended June, PayPal registered sales growth of 20% to $1.95 billion and increased its customers base from the first quarter by 4.1 million to 152.5 million.
EBay revealed that the current President of eBay Marketplaces – Mr. Devin Wenig – will take the helm of eBay after the spin-off. Senior American Express executive – Mr. Dan Schulman, will become president of PayPal effective immediately, before leading the new PayPal company as CEO after the spin-off is complete.
There is no executive role planned for eBays current Chief Executive Officer Mr. John Donahoe in either of the new companies. The same applies to the Chief Financial Officer Mr. Bob Swan. The spin-off process, however, will be overseen by both of them and they may join the companies boards.
eBay Inc. surged 6.65% by 13:38 GMT to $56.16 per share on the NASDAQ, marking a one-year change of +0.65%. The company is valued at $65.36 billion. According to CNN Money, the 36 analysts offering 12-month price forecasts for eBay Inc. have a median target of $59.50, with a high estimate of $66.00 and a low estimate of $50.00. The median estimate represents a +12.99% increase from the previous close of $52.66.
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