PayPal to Split From eBay in 2015

AP/Manu Fernandez

American Express' Dan Schulman will head the publicly traded mobile payment service

The mobile payment service PayPal is splitting from eBay and will become a separate and publicly traded company next year.

Almost a year after billionaire Carl Icahn opened a proxy fight and pressured eBay for a spinoff of PayPal, eBay president and CEO John Donahoe announced the split Tuesday.

Donahoe will step down as CEO of eBay after overseeing the separation of the two companies and will not have a management role in either one afterward. He may have a seat on the board at one or both, along with eBay chief financial officer Bob Swan.

eBay, based in San Jose, said that the separation was the best path for growth and shareholder value creation for each business.

eBay is an e-commerce site that connects sellers to buyers. PayPal, acquired by eBay in 2002 for $1.3 billion, has been its fastest-growing segment. In the most recent quarter, PayPal gained 4 million new, active registered accounts, up 15 percent to 152 million.

Consumers who use PayPal can send and receive payments online, with all transactions backed by prepaid user accounts, bank accounts or credit cards. The service is available in 203 markets worldwide and is on track to process 1 billion mobile payments in 2014.

But major competitors are now getting into the mobile payment sector, including Apple. Last month, Apple Inc. announced a new digital wallet service called Apple Pay that is integrated with its Passbook credential-storage app and its fingerprint ID security system.

There is a push away from traditional credit cards, particularly after a string of high-profile data breaches that have ensnared major retailers such as Target and Home Depot. Citibank predicts that the mobile payments business will grow from $1 billion last year to nearly $60 billion by 2017.

"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," Donahoe said.

Shares of eBay jumped 8 percent to $57.06 before the opening bell, close to its high for the year.

Dan Schulman, an executive at American Express, will be the new president at PayPal, effective immediately. The 56-year-old will become PayPal's CEO once the separation takes place.

Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay Inc. He will lead the eBay Marketplaces and eBay Enterprise businesses.

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