NEW YORK (The Deal) -- Carl Icahn on Wednesday escalated his criticism of eBay (EBAY - Get Report) directors, calling the group "dysfunctional" and urging shareholders to instead support a competing slate the investor plans to offer for election.
Icahn, who is pushing for eBay to spin off its PayPal unit, on Tuesday wrote a letter to shareholders accusing eBay directors Marc Andreessen and Scott Cook of putting their personal financial interests ahead of shareholders. The investor, owner of 2% of eBay shares, also said that eBay CEO John Donahoe is "completely asleep" or "either naive or willingly blind to lapses by the board."
EBay responded by saying Icahn "has cherry-picked old news clips and anecdotes out of context to attack the integrity of two of the most respected, accomplished and value-driven technology leaders in Silicon Valley."
At issue is Cook's ties to Intuit Inc., a company he founded and remains a major shareholder, but which Icahn says is a "fierce competitor" of PayPal. Andreessen meanwhile is under fire for his role in eBay's $1.9 billion sale of Skype Technologies SA to a consortium including Andreessen's venture firm Andreessen Horowitz. The consortium 18 months later sold the unit to Microsoft Corp. for $8.5 billion.Icahn in his Wednesday response agreed that Andreessen and Cook are accomplished, but said he believes the directors "appear to be value-driven for themselves," personally profiting at the expense of eBay. The investor repeated his questions about why the two remain on the eBay board. "Corporate governance failures do not have a shelf-life," Icahn wrote, dismissing eBay's response that the Skype deal was in the past as irrelevant. As to Cook, Icahn noted that eBay's $800 million deal to acquire Braintree Payment Solutions LLC announced in September pushes it into more direct competition with Intuit's payment processing operation. "Is it good for PayPal to have a competitor in the board room gaining insights into its operations, product pipeline and proprietary technologies?" Icahn wrote. "We believe that Mr. Cook's participation in strategic discussions on both sides of the table will continue to present challenges for eBay and will eventually, if it has not happened already, become a major strategic disadvantage for eBay." The e-commerce site acquired PayPal for $1.4 billion in 2002. The business accounted for about $6.6 billion of eBay's total 2013 sales of $16 billion. The marketplaces auction unit generated $8.2 billion in 2013 sales. The corporate division had $1.1 billion in revenues. Icahn said that he expects in the coming weeks to detail a full case for the separation of PayPal and eBay.