NEW YORK: US online auction giant eBay yesterday announced plans to spin off its PayPal unit, a move designed to help it compete better in the fast-moving online payments segment.
The plan, to take effect next year, comes after months of pressure from activist investor Carl Icahn, who had assailed eBay for poor management and claimed that keeping eBay tied with PayPal depressed the value of both units.
An eBay statement said that a board review concluded that “a changing competitive landscape creates enormous opportunities for eBay and PayPal” and that “separation will create sharper strategic focus and better position each business to capitalise on those growth opportunities as independent companies.”
Company President and Chief Executive John Donahoe said that “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 move comes with the online payments segment facing new challenges from the likes of Apple, which introduced a mobile payments platform using its iPhones, and newcomers such as Square. “The pace of industry change and innovation in commerce and payments requires maximum flexibility to stay competitive and drive global leadership,” the eBay statement said.
Current eBay shareholders will receive stock in the future PayPal in proportion to their current holdings, the company said. AFP
