Ebay to turn PayPal into separate company

PayPal, bought by ebay in 2002, became its fastest growing unit amid an expansion in the mobile banking market.

    Ebay to turn PayPal into separate company
    PayPal says it has 152m active accounts [Reuters]

    Ebay, the internet auction service, says it will turn its lucrative internet payment service PayPal into a separate listed company.

    The decision to split the companies next year, announced on Tuesday, was received positively by traders, sending ebay's share value up nearly 7 percent to $56.16 in morning trading.

    The move comes following months of pressure from billionaire investor Carl Icahn, who owns a 2.5 percent stake in ebay, and despite resistance from its chief executive John Donahoe, according to FactSet, a financial research company.

    Ebay acquired PayPal in 2002 for $1.3bn. PayPal enables users to use their bank accounts to make payments without using credit or debit cards or cheques. It makes money by charging a fee for each transaction.

    It is also a growing force in the growing mobile device payment sector, acquiring companies such as Braintree and its One Touch mobile payment service. 

    Donahoe said he would step down as chief executive of eBay after overseeing the separation and would not have a management role in either company afterwards.

    EBay said that the separation was the best path for growth and shareholder value creation for each business.

    In the most recent quarter, PayPal gained four million new active accounts, up 15 percent on the previous quarter's figures.

    Revenue rose 20 percent to $1.95bn, about 45 percent of eBay's total revenue.

    PayPal has 152 million active accounts, is available in 203 markets worldwide and is on track to process one billion mobile payments in 2014.



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