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eBay to split from PayPal next year

Article By: ,  Financial Analyst
September 30, 2014 5:15 PM

Online auction site eBay has revealed it will split from its payments system PayPal into a separate company in the second half of 2015, it was revealed today (September 30th).

Chief executive John Donahoe said: "A thorough strategic review… shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively."

"The industry landscape is changing, and each business faces different competitive opportunities and challenges. "Ebay and PayPal are two great businesses with leading global positions in commerce and payments," he added.

While he will not have a management role in either company, Mr Donahoe will oversee the separation, Sky News reports.

The move comes nine months after investor activist Carl Icahn demanded a split of the two divisions. Mr Donahoe and eBay’s board appeared to have successfully fought off demands from the hedge fund magnate nine months ago, but has decided to reverse course and accept a corporate separation.

The decision to split also comes a few weeks after Apple announced an entry into the mobile payment industry, with its Apple Pay system.

eBay jumped seven per cent after the world’s biggest online marketplace made the announcement.

PayPal's revenues are growing at 19 per cent a year, reaching $7.2 billion (£4.5 billion), while eBay's is $9.9 billion and is growing at ten per cent a year.

Its payment system is available in 203 markets worldwide and is expected to process one billion mobile payments this year, the BBC reports.

eBay bought PayPal in 2002 for $1.5 billion and the payments company is now the Silicon Valley firm's fastest-growing business, with 143 million active users at the end of 2013, up 16 per cent from a year earlier.

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