PayPal is going to be spun off from eBay in the second half of 2015 and become its own separate publicly traded company.
Ebay’s board said that the decision has been made as a means of maximizing growth and shareholder value for both entities.
John Donahoe, eBay president and CEO, said:
“Ebay and PayPal are two great businesses with leading global positions in commerce and payments,”
“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.”
Donahoe will be overseeing the separation of the two companies, which is happening after months of demands by investor activist Carl Icahn to separate the two into different divisions.
Carl stated that by splitting the companies, PayPal (and eBay for that matter) can build on their strengths and allow management to focus on their own core businesses.
A split also prevents conflicts of interest with the payment processor’s parent.
PayPal is one of the world’s largest payment systems, with a presence in over 200 markets and processing billions of payments on a yearly basis – over the past year it has processed about $203 billion in payment volume and has around 153 million active digital wallets.
eBay has recently rebranded itself and shifted from being an online auction site for private sellers to become a market place where businesses can sell to customers with the increasingly popular “Buy It Now” option.
12 years ago eBay acquired PayPal and since then the payments processor generates nearly half of the company’s net revenue (roughly 41 percent).
However, many analysts say the split is in the best interest of PayPal, as it will attract e-commerce companies like Amazon.com and Alibaba, who would otherwise not use it (as its tied to one of their competitors), to use the PayPal payment system on their sites.
Video – E-Commerce
PayPal and eBay do most of their business online. Therefore, they are e-commerce companies.