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PayPal To Split From EBay

Declaring that “the industry landscape is changing and each business faces different competitive opportunities and challenges,” eBay CEO John Donahoe announced Tuesday (Sept. 30) that PayPal will be split into its own publicly-traded company.

The Donahoe statement said that “eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets. As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities. And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward. Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders.”

The statement also announced two new sets of leadership. For the new standalone PayPal, the board has brought over an Amex executive. “The company also today announced the appointment of Dan Schulman to be President of PayPal, effective immediately, and CEO-designee of the standalone PayPal company following separation,” the statement said. “Schulman joins PayPal from American Express, where he was president of the company’s Enterprise Growth Group. A seasoned leader in multiple industries, Schulman has held senior executive and CEO roles at AT&T, Priceline and Virgin Mobile, prior to joining American Express.”

Back at eBay, Devin Wenig—currently the president of eBay Marketplaces—will become CEO of eBay. “As CEO of eBay, Wenig will lead the eBay Marketplaces and eBay Enterprise businesses. Revenue over the last twelve months for these two businesses grew approximately 10 percent year-over-year to $9.9 billion, with eBay Marketplaces accounting for about $8.7 billion. eBay Marketplaces and eBay Enterprise collectively handled approximately $85 billion of gross merchandise volume and gross merchandise sales, which grew 13 percent year over year. Scott Schenkel, currently the CFO of eBay Marketplaces will become the CFO of the new eBay company.”

The company said its board was worried that the synergies that mutually helped each company are starting to evaporate as the payments industry shifts. “The benefits of the existing relationships between eBay and PayPal will naturally decline over time and can be optimized in arm’s length operating agreements between the two entities. Arm’s length operating agreements can formalize the existing relationships between the two companies and capture ongoing synergies.”

Donahoe said that these changes will happen “as a tax-free spin-off in the second half of 2015, subject to market, regulatory and certain other conditions.” Both Donahoe and current eBay CFO Bob Swan “will be responsible for leading the separation of each business, with board oversight. This includes determining appropriate management and capital structures for eBay and PayPal, and putting in place appropriate operating agreements. Neither Donahoe nor Swan will have an executive management role in the new eBay and PayPal companies. But to provide continuity, they each expect to serve on one or both of the boards of the two companies.”

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