EBay dismisses Icahn proposal to spin off Paypal

Posted by Reuters

Share on Facebook

Tweet on Twitter

(Reuters) – Carl Icahn has taken a stake in eBay Inc and is proposing a spin-off of the its fast-growing PayPal division, but the e-commerce giant rebuffed the overture, setting the stage for a potential battle with the activist investor.

EBay, which bought PayPal for $1.5 billion in 2002 and has considered hiving off the multibillion-dollar payments service, argued on Wednesday that the business would lose synergies with the overall e-commerce business as an independent unit.

“First, eBay accelerates PayPal’s success. Second, eBay data makes PayPal smarter. And third, eBay funds PayPal’s growth,” Chief Executive John Donahoe told analysts on a post-results conference call.

Some analysts, however, said that operating as a separate entity would encourage other online retailers to adopt the service and help retain key executives, with a spinoff that could unlock the value of a service that grew 19 percent during the holiday quarter.

Shares of eBay, which also reported earnings per share a penny above Wall Street expectations, jumped as much as 12 percent. The stock was up 7 percent at $54.41 after hours.

Donahoe said he had heard Icahn out but rejected his proposal. He added that the company intended to step up investments to safeguard the market position of the thriving payments service, which may exert pressure on margins.