eBay has announced that PayPal and itself will split into separate public companies in 2015, moving the payments company out from its umbrella. The move follows pressure from activist billionaire hedge fund investor Carl Icahn, who advised eBay to make this move earlier in the year, reports the BBC.
Icahn currently holds 30 million eBay shares. He made $108 million after the announcement, as eBay's stock price climbed over 10 per cent in response to the news. He first pressured the move back in April, but was rebuffed as he failed to gain enough support.
The spin-off is set for the second half of next year. eBay President and CEO John Donahoe states that it was not a decision made simply in answer to Icahn's demands. Donahoe said the decision came after "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."
"We are happy that eBay's board and management have acted responsibly concerning the separation - perhaps a little later than they should have, but earlier than we expected," respondedinvestor Icahn in a statement on Tuesday.
Founded in the late 1990s, PayPal was bought out by eBay in 2002 for $1.5 billion, and accounts for around 40 per cent of eBay's total revenue. The company has over 152 million active users and accounts increased 15 per cent in the last quarter alone.
The move sees eBay's reaction to PayPal's change of direction from focusing on online commerce to in-person mobile transactions. Recent moves include the acquisition of its Braintree unit and development focus on its One Touch system. The online payment company also recently announced the addition of limited Bitcoin support in an experiment which may lead to wider acceptance of the cryptocurrency.
"Breaking off from eBay will provide PayPal with more autonomy to compete in the payments space, particularly with respect to Apple Pay and other emerging mobile wallet providers," reasoned online advertising analytics firm eMarketer.
Both companies will get new CEOs as part of the deal, with PayPal President Dan Shulman taking the chair at PayPal and eBay Marketplaces President Devin Wenig taking the reins at eBay.
