After spending much of this year explaining why its two businesses are best left together, eBay’s board of directors and CEO did a complete about-face Tuesday morning, announcing a plan under which its PayPal and eBay marketplace businesses will be split into separately traded public companies by the middle of next year. And CEO John Donahoe will step down as CEO of eBay once the split takes effect in 2015.
Donahoe began 2014 under pressure from activist investor Carl Icahn to split the company into its faster growing payments business, PayPal, and its legacy e-commerce marketplace, eBay. Donahoe and eBay’s board successfully resisted those pleas in winning a proxy fight, but only months later during the company’s annual strategic review, decided that a split in 2015 is now the right move to position each of those company’s for the future.
“What the proxy fight forced was me to come out and articulate our plan of record, our position at that moment, and that’s what I did,” Donahoe told CNBC, “As we’ve continued our annual assessment, looking forward three to five years about how we can best position eBay and PayPal, we think the competitive position and the competitive environment of commerce and payments are going through accelerating change. That creates new sets of opportunities and challenges for both eBay and PayPal and (we believe) that operating independently will give eBay and PayPal focused strategic flexibility and an ability to move quickly and decisively in this changing environment.”
While Donahoe has spent much of 2014 extolling the benefits that eBay and PayPal derive from being part of one company, he now says those benefits are in decline.”When you look forward, eBay will be less than 15 percent of Paypal’s business three years from now and we can achieve many of the benefits of the synergies through arms-length commercial relationships.” Donahoe told CNBC.
Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay when the split becomes final. EBay also announced that it has hired Dan Schulman, currently the president of the Enterprise Growth Group at American Express, to take over as PayPal’s president immediately. Schulman will become PayPal’s CEO once the split from eBay is complete.