eBay and PayPal Split

News Article - Wednesday, 01 October 2014 10:55

By: Kerry Butters Category: Networking

Online trading site eBay is to split from the payments company PayPal, which will now form into its own, publicly traded company.

The move is set to be completed in the second half of 2015, with both companies taking on new CEOs as part of the agreement – Devin Wenig, currently eBay Marketplaces President will take over at eBay, and Dan Schulman the PayPal President taking over at PayPal.

It is a split that many have predicted, with PayPal’s revenues growing at 19% a year, twice as quickly as eBay’s at 10%. The split points to a reversal of strategy by eBay, which has up till now resisted pressure to separate. However, current CEO John Donahoe now feels that the logic behind running the companies in conjunction has changed:

"A thorough strategic review […] shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively,” he said. (eBay Inc. )

"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. […] 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.”

Indeed, on announcement of the move, eBay’s shares were sent up 7.5%.

PayPal’s payment system serves in over 200 markets worldwide, and is expected to process more than one billion payments from mobiles this year. Market analysts are pleased with the split, which is generally seen to strengthen PayPal’s position as competing e-payment systems, such as Apple Pay and Alipay, enter the marketplace.

eBay acquired PayPal in 2002 for $1.5 billion. With 143 million active users, up 16% from last year, PayPal is now eBay’s fastest growing business.

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