eBay Inc.’s board of directors will separate the online auction Website from subsidiary PayPal next year, making two independent, publicly traded companies. The move also has created a shakeup in the executive suite: Dan Schulman, former president of American Express’ Enterprise Growth Group, joins PayPal as president, effectively immediately, and he will become PayPal CEO after the companies are separated; and Devin Wenig, president of eBay Marketplaces, will become CEO of eBay.
“As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities,” said John Donahoe, eBay Inc. president and CEO, in a statement. “And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward.” Donahoe and Bob Swan, eBay Inc. chief financial officer, will oversee the separation and serve on the boards of both companies.
The eBay Inc. board determined that keeping the two entities together beyond next year would be disadvantageous to eBay and PayPal strategically and competitively, with the two companies facing different competitive opportunities and challenges, according to an announcement. The company expects to complete the transaction as a tax-free spinoff in the second half of 2015, and it says the spinoff will deliver sustainable shareholder value.
The split has “got to be catalyzed by the seismic movements in mobile and digital payments in September 2014,” says Todd Ablowitz, president, Double Diamond Group, referring to the launch of Apple Pay. “While [the eBay Inc. board] has been talking about this for some time, it’s a critical moment for PayPal to take its hundreds of millions of accounts on file and put them into use in the world of mobile commerce,” he adds. “You have to believe PayPal as an independent won’t be constrained by what its biggest customer and parent company might want. PayPal is able to be more free and more aggressive in the mobile, digital and omnichannel arenas.”
For months, the eBay board has been discussing the possible spinoff of PayPal, with the lightning rod of the discussions being investor Carl Icahn—a 2 percent owner of eBay—who had been urging PayPal’s spinoff until an armistice was reached last April between eBay and him.
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