Carl Icahn's War of Words with eBay Takes a Major Twist

NEW YORK (TheStreet) - Carl Icahn changed his position in a scorched-earth campaign he's running against e-commerce giant eBay (EBAY). The billionaire activist now wants eBay to conduct an initial public offering of 20% of the company's PayPal payments division, whereas previously, he advocated eBay spin-off the unit entirely.

Icahn's slight retreat comes about a month into his campaign against the company and its management. Whether or not a changing proposal by Icahn gives eBay an upper hand in warding off the activist as its annual shareholder meeting looms is still to be seen. A sale or full spin-off of PayPal, however, now appears to out of the question.

The Russian Front for eBay

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In a March 11 preliminary proxy statement, Icahn proposed a slate of two nominees, Daniel A. Ninivaggi and Jonathan Christodoro, to eBay's board of directors. In another proposal, Icahn also sought for eBay to hire an investment bank to spin-off eBay's PayPal division.

"Shareholders recommend that the Board of Directors and management act expeditiously, consistent with effective tax considerations, to engage an investment banking firm to effectuate a spin-off of eBay's Payments segment into a separately traded public company," Icahn's preliminary proxy stated.

In a Wednesday letter to eBay's management, Icahn changed his tune, saying eBay could easily conduct an IPO of 20% of PayPal, allowing the company to retain 80% control of the fast-growing asset. Icahn also conceded that there were so-called synergies between eBay and PayPal, which could be preserved in a minority stake offering.

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