Big news in the world of e-commerce. eBay announced that it will separate eBay and PayPal into two independent, publicly-trade companies next year.
Investor Carl Icahn had famously called for such a spin-off, and it looks like he is now getting his wish. He’s reportedly the company’s six-largest shareholder.
The decision came after the Board of Directors reviewed the company’s growth strategies and structure. They concluded that creating two separate businesses best positions them to “capitalize on their respective growth opportunities in the rapidly changing global commerce and payments landscape.”
Indeed, both eBay and PayPal face greatly increased competition from numerous big players including Google, Apple, Amazon, Alibaba, and Square, to name a few. Then there are companies like Stripe, which already has deals in place with Facebook and Twitter.
“eBay and PayPal are two great businesses with leading global positions in commerce and payments,” said President and CEO John Donahoe. “For more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value. However, 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. The industry landscape is changing, and each business faces different competitive opportunities and challenges.”
“eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets,” Donahoe added. “As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities. And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward. Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders.”
In its announcement, eBay listed the following as three conclusions the Board came to upon completing its review:
1. A changing competitive landscape creates enormous opportunities for eBay and PayPal; separation will create sharper strategic focus and better position each business to capitalize on those growth opportunities as independent companies. The pace of industry change and innovation in commerce and payments requires maximum flexibility to stay competitive and drive global leadership.
2. The benefits of the existing relationships between eBay and PayPal will naturally decline over time and can be optimized in arm’s length operating agreements between the two entities. Arm’s length operating agreements can formalize the existing relationships between the two companies and capture ongoing synergies.
3. This is the best path for delivering sustainable shareholder value. eBay is a leading global commerce platform that has benefited from PayPal, and PayPal is a strong, rapidly growing global payments leader because it has been part of eBay. But beyond 2015, eBay and PayPal will each benefit more and create greater value from the strategic focus, speed, flexibility and agility that come with being independent publicly traded companies.
HERE ARE THE QUESTION THAT ARISES:
What does the split mean for business owners and moguls on eBay?
Will this strategic approach in separating a commonly known brand change the market segmentation and classification on e-commerce platform?
Is this another CAMOUFLAGE sale of established brand in the making as it’s commonly business idea with eBay?
Would customer’s loyalty be an issue?
What role does Smartphone payment platform such as Apple Pay played in shaping e-commerce?
Please share your thought in the box below