EBay plans PayPal spinoff in 2015

Oct 01, 2014, 2:43 AM EDT
 In this photo illustration, an eBay website is seen on a computer screen and the PayPal website is seen on an iphone on September 30, 2014 in Miami, Florida.
AFP/Getty Images

EBay Inc's agreement on Tuesday to spin off PayPal next year will give the unit more flexibility to strike deals in the rapidly evolving payments space as growth at the company's traditional e-commerce business slows. Reuters writes:

The surprise move is a huge about-face for eBay's leadership, including Chief Executive Officer John Donahoe, who resisted shareholder activist Carl Icahn's calls for a split earlier this year and led a months-long campaign to convince investors that eBay should remain intact. Icahn, eBay's sixth-largest shareholder, eventually backed off in April.

But eBay directors and executives shifted their stance on the split in June after a six-month internal study of the payments landscape, Donahoe said in an interview. "We felt like a couple things were changing," Donahoe said.

"Most notably, the pace of change in this competitive environment, and payments and commerce is accelerating and will continue to over the next three to five years."

By splitting off PayPal, the fast-growing payments division and the new eBay would have "more focus, more flexibility, more agility, more ability to move quickly," said Donahoe, who will step down as CEO after the spinoff in the second half of 2015. Donahoe and Chief Financial Officer Bob Swan, who will also leave next year, plan to serve on the boards of one or both companies after the split.

EBay will spin off PayPal as a publicly traded company in a transaction that will be tax-free to shareholders.

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