Board Says eBay, PayPal ‘Better Together’ (March 25, 2014)
eBay Inc.’s board of directors says spinning off PayPal in an IPO would not be in the company’s and investors’ best interest, resisting a call from activist investor Carl Icahn—a 2 percent owner of eBay—to sell all or part of PayPal.
In a letter to investors, the board called on investors to vote against Icahn’s non-binding breakup proposal at the company’s annual shareholder meeting, scheduled for May 13, and against Icahn’s two nominees for the company’s board. “Our board is in unanimous agreement that neither Mr. Icahn’s breakup proposal nor his nominees are in the best interests of eBay’s shareholders,” the letter said, noting that during the past five years, the combined company has generated a 441 percent increase in share price. “In today’s competitive environment, the advantages of PayPal and eBay together are more important than ever,” the board said.
The letter listed five key reasons why the companies are “better together:” PayPal grows faster because of its connection to eBay; eBay accelerates PayPal’s growth; increased profits from data sharing; eBay provides efficient capital for PayPal; and the overall convergence of commerce and payments. “Our commerce and payments businesses reinforce and support each other. Taking them apart would destroy value by reducing their considerable synergies, which cannot be easily replaced by arm’s length commercial agreements,” the board noted.
Icahn initially proposed spinning off the entirety of PayPal, which he said would generate a higher valuation as a standalone publicly traded company than as a subsidiary of eBay. Last week, he said he also was open to the possibility of selling off just 20 percent of PayPal.