Auction site eBay has announced that it is to split off its online payments service PayPal into a separate business.
The move, set to be completed by the middle of next year, comes after a “strategic review” carried out by eBay’s board of directors, which concluded that a split would be the best option for the company as it looks to stay competitive in an increasingly crowded marketplace.
eBay originally bought PayPal for $1.5bn in 2002, and has overseen a major growth in the service, which is now available in 203 markets across the world. It had 143m active users at the end of 2013, up 16 percent from a year earlier, making it eBay’s fastest-growing business, and expects to process one billion mobile payments this year.
In its statement confirming the spin-off, eBay said that PayPal’s annual revenue had grown to reach $7.2bn (£4.5bn) in 2013, with the parent company coming in at $9.9bn.
Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay company, leading the eBay Marketplaces and eBay Enterprise businesses. Dan Schulman, currently an American Express co-executive, will be the new president and chief executive of PayPal.
“eBay and PayPal are two great businesses with leading global positions in commerce and payments,” said eBay President and CEO, John Donahoe. “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.
“eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets,” he added.
Earlier this year, eBay was forced to play down a call to sell off PayPal following comments from activist investor Carl Icahn, who said such a move was a “no-brainer”. His suggestion 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.”
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