Ebay to spin off PayPal into separate company

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Ebay to spin off PayPal into separate company

Posted on: September 30th, 2014 by tommyj

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Online marketplace eBay announced it will split from the mobile payments service PayPal, forming two independently traded companies beginning in 2015.

Devin Wenig will become CEO of the new eBay following the split, while American Express executive Dan Schulman will assume the same positions with PayPal. Current president and CEO John Donahoe and CFO Bob Swan will serve on the boards of both companies once the tax-free split takes place during the second half of next year.

In a statement released Tuesday, eBay says after a review with the company’s board of directors, the company decided staying together would be "less advantageous" for both eBay and PayPal.

"As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities," said Donahoe in a statement. "And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward."

Earlier this year, eBay was involved in a heated exchange between activist investor Carl Icahn over his push for a PayPal spinoff. In February, Icahn accused Donahoe of "ineptitude," prompting eBay founder Pierre Omidyar to defend the company against what he called "false and misleading" attacks.

Shares of eBay are up 11% in pre-market trading.

Revenue over the last 12 months at eBay jumped 10% to $9.9 billion. However, the company lowered its third quarter outlook during its earnings call in July. The company is expected to report third quarter earnings next month. In May, eBay reported a massive data breach, exposing a database containing user information such as names, encrypted passwords and e-mail addresses.

As for PayPal, which eBay acquired in 2002 for $1.5 billion, Schulman takes over as the new company’s CEO following previous stints in executive roles at American Express, AT&T and Priceline.

WATCH: USA TODAY’s interview with Dan Schulman from July

Follow Brett Molina on Twitter: @brettmolina23.

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