EBay-PayPal to break up in July

US online giant EBay said yesterday its board approved the planned spinoff of its PayPal online payments unit, which would trade as an independent company from 20 July.

Under the plan, PayPal stock would be distributed to eBay shareholders on 17 July, with the financial unit starting to trade under the symbol PYPL on 20 July.

"eBay and PayPal are two great, special businesses," said John Donahoe, president and chief executive of eBay.

"As separate, independent companies, eBay, led by Devin Wenig, and PayPal, led by Dan Schulman, will each have a sharper focus and greater flexibility to pursue future success in their respective global commerce and payments markets."

The plan, announced last year, comes following months of pressure from activist investor Carl Icahn, who had assailed eBay for poor management and claimed that keeping eBay tied with PayPal hurt the value of both units.

Following the acquisition of PayPal in 2002 for roughly $1.5 billion (roughly Rs9,528 crores) in shares, PayPal had expanded beyond a simple payment mechanism for eBay auctions.

However, according to Icahn and others PayPal needed to change to compete better in the fast-moving online payments segment.

Stockholders would receive one PayPal share for every EBay share. The split was formally  approved by the board Friday, according to the company's statement.

Like its parent, PayPal, would trade on the Nasdaq stock market.

EBay and PayPal would operate under a five-year agreement that would guarantee a reliable source of revenue for PayPal after the separation. As an independent unit PayPal would be free up to tie-up with retailers and other financial firms, as Google Inc and Apple Inc sought to turn their products into tools for digital payments.

EBay's marketplaces business, which was facing competition from Amazon.com Inc and Alibaba Group Holding Ltd, had seen revenue growth lag behind PayPal, which it bought in 2002.

According to Ebay, the new PayPal shares would trade from about 6 July on a proforma basis, and would be issued on 17 July. The shares would start trading regularly from 20 July, unless any unforeseen circumstances emerged, EBay said.