Pressure from activist investor Carl Icahn forces eBay management to slash jobs and sell off assets
Carl Ichan, the largest shareholder of auction site eBay, has forced a corporate shakeup of the company, which will effectively split into three separate units.
The changes will result in major job losses at the company as well as the spinning off of its enterprise division, along with its PayPal business.
The restructuring was announced by eBay when it reported double-digit revenue growth and “solid earnings performance”.
The announcement, by eBay’s CEO and President John Donahoe was perhaps significantly entitled “Staying Focused on Opportunities, Dealing with Challenges”.
It revealed that a Carl Ichan supporter in the form of Jonathan Christodoro, MD of Icahn Capital LP, would join eBay’s board of directors.
“We also announced an agreement with one of our largest shareholders Carl Icahn,” said Donahoe, before welcoming Christodoro to the board. Donahoe also mentioned that the past year had been “marked by unexpected events and distractions.”
“We plan to reduce our workforce globally by approximately 2,400 positions, which represents about seven percent of our global workforce, across eBay Marketplaces, PayPal, and eBay Enterprise,” he added. “This was a difficult decision. Eliminating jobs is never easy. But it is necessary to reduce complexity and create more competitive cost structures..
The planned job cuts will be across the marketplace, payments and enterprise divisions, eBay said.
The company announced last September that it would to split off its online payments service PayPal into a separate business. That u-turn was a bitter pill to swallow. Earlier in 2014, eBay was forced to play down a public call by Carl Icahn to sell off PayPal, who said such a move was a “no-brainer”.
Icahn’s suggestion as the time was politely rejected by the company’s board, which said that it did not believe that, “breaking up the company is the best way to maximise shareholder value.”
But now the company has confirmed that it will spin off its enterprise division, meaning that the company once known as eBay will be split into three entities, namely PayPal, enterprise (which helps retailers around the world improve their online presence) and marketplace.
“We believe the actions of eBay’s board and management in crafting this agreement with us have marked a large step forward for corporate governance,” Icahn was quoted as saying in a statement. “The company reached out to us recently to discuss value enhancement generally, and our constructive conversations led to the mutual development of a governance structure going forward that we believe will better align the interests of shareholders, directors, management and other stakeholders.”
Carl Icahn is well known activist investor and is thought to be worth around $26 billion. He claims to campaign on behalf of shareholders, and for example has previously written open to letters to Apple’s CEO Tim Cook, urging him to undertake share buyouts.
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