eBay Will Not Build Its Own Payment Platform After The PayPal Split

It looks like there won’t be an ePay to go with eBay after the company’s split off from PayPal is complete.

Yesterday, PayPal Holdings filed a Form 10 with the Securities and Exchange Commission (SEC) as part of the ongoing mission of 2015 to separate the two firms.

In a post on the corporate blog, PayPal noted:

“The separation of PayPal from eBay will provide strategic flexibility to set up each standalone company for success while preserving the synergies between the two companies and minimizing dis-synergies. We remain focused on setting up both businesses for long-term success, with greater strategic focus and flexibility to capitalize on their respective opportunities as global leaders in commerce and payments.”

PayPal/e-Bay’s filing had some more specific details.

It seems, for instance, that eBay will not be developing its own internal payment system after the split, as the operating agreement between the soon to be two firms bars them from competing with each other for five years.

“Subject to certain exceptions, eBay and its controlled affiliates will be prohibited from directly or indirectly engaging in the business of marketing, distributing, promoting or selling its own proprietary payment solutions for use on the eBay Covered Properties, and PayPal and its controlled affiliates will be prohibited from directly or indirectly engaging in the business of marketing, distributing, promoting or selling its own proprietary marketplace offerings. These restrictions will continue for the term of the operating agreement.”

Going forward, PayPal will provide payment processing and credit services to eBay.com and eBay Marketplaces customers. The form also disclosed that there are some cases where directors of  PayPal’s board have a financial interest in eBay that could lead to conflicts of interest.

“Continuing ownership of eBay common stock and equity awards, or service as a director at both companies could create, or appear to create, potential conflicts of interest if PayPal and eBay have disagreements about the contracts between them that continue or face decisions that could have different implications for PayPal and eBay.”

What’s next to complete the separation?

Without a tax penalty, eBay will divest itself of all PayPal common stock to eBay shareholders on a pro rata basis. The marketplace will continue to trade on the NASDAQ as eBay while PayPal intends to list its common stock.

“PayPal will enter into a separation and distribution agreement with eBay, as well as certain other agreements, such as an operating agreement, a transition services agreement, a tax matters agreement, an employee matters agreement and an intellectual property matters agreement. These agreements will provide for the allocation between PayPal and eBay of eBay’s assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after PayPal’s separation from eBay. These agreements will also govern the relationships between PayPal and eBay following the completion of the separation.”