Almost a year after billionaire Carl Icahn opened a proxy fight and pressured eBay for a spinoff of PayPal, eBay President and CEO John Donahoe announced the split today.
Donahoe will step down as CEO of eBay after overseeing the separation of the two companies and will not have a management roll in either of the two afterward. He may have a seat on the board at one or both, along with eBay Chief Financial Officer Bob Swan.
EBay, based in San Jose, California, said that the separation was the best path for growth and shareholder value creation for each business.
In the most recent quarter, PayPal gained 4 million new, active registered accounts, up 15 per cent, to 152 million.
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Consumers who use PayPal can send and receive payments online, with all transactions backed by prepaid user accounts, bank accounts or credit cards.
The service is available in 203 markets worldwide and is on track to process 1 billion mobile payments in 2014.
But major competitors are now getting into the mobile payment sector, including Apple.
There is a push away from traditional credit cards, particularly after a string of high-profile data breaches that have ensnared major retailers like Target and Home Depot.
Citibank predicts that the mobile payments business will grow from USD 1 billion last year, to nearly USD 60 billion by 2017.
"A thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively," Donahoe said.
Dan Schulman, an executive at American Express, will be the new president at PayPal, effective immediately. The 56-year-old will become PayPal's CEO once the separation takes place.
Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new EBay Inc. He will lead the eBay Marketplaces and eBay Enterprise businesses.