It’s official: eBay to spin off PayPal business

It’s official. Following a strategic review of the company’s growth strategies and structure, the eBay board has approved a plan to separate the company’s eBay and PayPal businesses into independent publicly traded companies in 2015, subject to customary conditions.



Creating two standalone businesses best positions eBay and PayPal to capitalize on their respective growth opportunities in the rapidly changing global commerce and payments landscape, and is the best path for creating sustainable shareholder value, the company said. Earlier this year, activist investor Carl Icahn made a similar point, putting public pressure on the company to spin off its PayPal business in a back and forth that finally ended with a truce in April.



“eBay and PayPal are two great businesses with leading global positions in commerce and payments,” said eBay president and CEO John Donahoe. “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.”



The company expects to complete the transaction as a tax-free spin-off in the second half of 2015, subject to market, regulatory and certain other conditions.



Donahoe and company CFO Bob Swan will be responsible for leading the separation of each business, with board oversight. This includes determining appropriate management and capital structures for eBay and PayPal, and putting in place appropriate operating agreements. Neither Donahoe nor Swan will have an executive management role in the new eBay and PayPal companies. But to provide continuity, they each expect to serve on one or both of the boards of the two companies.



Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay company. As CEO of eBay, Wenig will lead the eBay Marketplaces and eBay Enterprise businesses. Revenue in the last 12 months for these two businesses grew approximately 10% year-over-year to $9.9 billion, with eBay Marketplaces accounting for about $8.7 billion. eBay Marketplaces and eBay Enterprise collectively handled approximately $85 billion of gross merchandise volume and gross merchandise sales, which grew 13% year over year. Scott Schenkel, currently the CFO of eBay Marketplaces will become the CFO of the new eBay company.



Concurrent with the announcement of the business separation plan, the company also today announced the appointment of Dan Schulman to be president of PayPal, effective immediately, and CEO-designee of the standalone PayPal company following separation.



Schulman joins PayPal from American Express, where he was president of the company’s Enterprise Growth Group. He has held senior executive and CEO roles at AT&T, Priceline and Virgin Mobile, prior to joining American Express.



“As both a leading global technology platform and a financial services business, PayPal requires a diverse blend of leadership skills and operating experience in its president and future CEO,” Donahoe said. “Dan has a proven track record of leading complex technology businesses at scale, driving sustainable growth and understanding how to innovate to drive competitive advantage and deliver compelling experiences for customers. I am thrilled to have him lead PayPal forward as a publicly traded, independent global payments leader, and we welcome him to the team.”



PayPal boasts more than 152 million active registered accounts. Accounts grew 15% year-over-year last quarter. Revenue in the last 12 months grew by 19% over the prior year period to approximately $7.2 billion.



According to the company, PayPal facilitates one in every six dollars spent online today. Total payments volume in the last 12 months increased by 26% to $203 billion. PayPal is fully localized in 26 currencies, is available in 203 markets worldwide and has relationships with 15,000 financial institutions.



With acquisitions such as Braintree and its new One Touch mobile payments experience, PayPal continues to expand its reach in the mobile payments industry. The company describes One Touch as the industry’s first and only single touch payments experience. PayPal processed $27 billion in mobile payments volume in 2013. It expects to process 1 billion mobile transactions in 2014.



Goldman, Sachs & Co. and Allen & Company LLC are serving as financial advisers and Wachtell, Lipton, Rosen and Katz is serving as legal counsel to eBay.