EBay CEO John Donahoe. Photo: eBay
EBay is breaking away from PayPal, turning its payments operation into a separate, publicly traded company.
“ebay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets,” eBay CEO John Donahoe said in a statement on the move, announced early Tuesday morning. “As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities.”
The split is something that activist eBay investor Carl Icahn has been fighting for since earlier this year, arguing that separating the eBay online marketplaces from PayPal would not only return value to shareholders, but would also make both companies stronger. At the time, Donahoe insisted that such a split didn’t make sense for either company, telling ReCode back in January: “I’d say commerce and payments are converging, not diverging.” But now, Donahoe and company are changing course.
In an interview with The New York Times , Donahoe resisted the idea that this 180-degree turn was in any way a reaction to Icahn’s petitions. And yet he conceded that after “a deliberate process,” he and the rest of the eBay team “got to the same place that Carl said early on.”
It doesn’t hurt that Apple just released its own heavyweight competitor to PayPal with its new mobile payments service, Apple Pay. It stands to reason that PayPal, which has 153 million accounts globally, would want to reassess and hone its strategy in the face of such a formidable challenger. In its statement, eBay made it clear that PayPal would be able to better address those threats untethered from its e-commerce parent. “The pace of industry change and innovation in commerce and payments requires maximum flexibility to stay competitive and drive global leadership,” the statement reads.
The split will likely take place in the second quarter of 2015, and Donahoe, who has served as eBay’s CEO for the last decade, will step down from all executive management roles. Ebay’s new CEO will be Devin Wenig, current president of eBay Marketplaces, and former American Express exec Dan Schulman will take over as PayPal’s new president. According to eBay’s statement, the two companies will continue to work together through arms length operating agreements, but “the benefits of the existing relationships” which include things like data sharing and strategic investments from eBay, would decline.
“Together, eBay and PayPal have delivered substantial value creation for our shareholders,” Donahoe said. “We believe eBay and PayPal will continue to do so as separate, independent companies. Tremendous opportunities exist for each business.”
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