EBay said on Tuesday that it would spin off its PayPal payments unit into a separate publicly traded company, taking a step the activist hedge fund magnate Carl Icahn first demanded nine months ago.
The move will cleave eBay almost in half, separating it from the payments processor it acquired 12 years ago and built into a giant that generates almost half of the company’s revenue.
The spinoff is expected to be completed in the second half of 2015. John Donahoe, eBay’s current chief executive, will step down from that role once the separation is complete.
Corporate breakups have come into vogue in recent years, as companies have looked toward simplifying their businesses to please shareholders looking for more tightly focused operations. It has been a frequent demand by activist shareholders who buy positions in companies and call for changes aimed at driving up stock prices.
PayPal was a central focus of a lengthy battle between eBay and Icahn, who demanded a spinoff of the unit as a way to generate value for shareholders. Such a move, the hedge fund billionaire contended, would highlight PayPal’s own strengths while letting its management team and eBay’s focus on their own core businesses.
Moreover, creating a separate board for PayPal could help remove what Icahn argued were conflicts of interest with the payment processor’s parent.
EBay shares jumped $3.44, or 6.5%, to $56.10 early Tuesday morning, within a 52-week trading range of $48.06 U.S. to $59.70 U.S.
