NEW YORK (The Deal) -- Carl Icahn on Thursday backed away from his proxy battle with eBay (EBAY - Get Report), dropping his proposal that the company split off its PayPal unit and withdrawing two nominees from the company's board.
The two sides in a statement said that eBay has agreed to Icahn's suggestion to appoint one-time AT&T (T - Get Report) CEO David Dorman to its board. Dorman, a founding partner of Centerview Capital Technology and chairman of CVS Caremark Corp (CVS - Get Report), worked with Icahn as lead independent director at Motorola Solutions (MSI - Get Report).
EBay CEO John Donahoe, a target of stinging criticisms from Icahn in recent months, in a statement said, "we are very pleased to have reached this agreement" and return focus to running the company.
"As a result of our conversations, it became clear that Carl and I strongly agree on the potential of PayPal and our company," Donahoe said. "I respect Carl's willingness to work together to drive sustainable shareholder value today and into the future. His record shows that he has done this with many other companies in the past."
Icahn, owner of about 2% of the company's shares, in January called for eBay to split off PayPal, and in a series of letters accused eBay directors Marc L. Andreessen and Scott Cook of conflicts. The activist said that corporate governance at eBay was among the worst he had seen and that Donahoe was not up to the task of being CEO of the company.
EBay and its directors responded by pointing out examples of potential Icahn conflicts, and arguing that eBay is better served by keeping PayPal in-house.
Icahn seemingly has had a difficult time gaining traction with shareholders, in March calling on eBay to sell 20% of PayPal to the public instead of doing a full spinoff.
The activist, who as part of the deal announced Thursday signed a confidentiality agreement covering any nonpublic information eBay officials share with him, said he has been engaged in conversations with Donahoe in recent weeks and plans to continue talks about eBay's future.
"We both strongly believe in the great potential of eBay and PayPal, and I have found a number of his ideas to be extremely compelling," Icahn said. "However, I continue to believe that eBay would benefit from the separation of PayPal at some point in the near future and intend to continue to press my case through confidential discussions with the company."