The split, which is expected to occur in the second half of 2015, will create two standalone businesses that will "capitalize on their respective growth opportunities in the rapidly changing global commerce and payments landscape, and is the best path for creating sustainable shareholder value," the company said in a press release.
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EBay CEO John Donahoe and CFO Bob Swan will step aside once the separation is complete. Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay company. Dan Schulman, previously president of American Express' (AXP) Enterprises Growth Group will become CEO of PayPal following the spinoff.
The spin off decision is an about face from eBay, which fought with activist investor Carl Icahn earlier this year over the issue. Icahn and eBay came to a settlement in April. Industry analysts say the split was likely a recent decision in answer to new competitive forces, such as Apple (AAPL) Pay. Here's what analysts said.
Sanjay Sakhrani, Keefe, Bruyette & Woods (Outperform; $65 PT)
We are not entirely surprised by the separation announcement given investor activism coupled with a challenging operating environment and heightened perceived competitive threats (e.g. Apple Pay). While there are clearly a number of unknowns related to the separation, we think an important component will be the standalone profitability of PayPal, excluding the investment initiatives being made within the payments segment to build on the company's omni-channel strategy. This strategy included investments made to develop the company's off-line presence, which have seen limited traction. Also, we think a separately traded PayPal might have better success in securing a higher multiple than what is implied in the current total enterprise valuation. Finally, we believe a separate PayPal might more easily be acquired as well.