Activist investor Carl Icahn on Wednesday called on eBay Inc to sell 20 percent of its PayPal payments unit in an initial public offering, a change in tack from his previous call for a complete spinoff.<\/p>\n
Icahn in January called for eBay to hive off its fast growing PayPal business, arguing the unit is undervalued as part of eBay.<\/p>\n
In recent weeks, Icahn has sent a series of open letters critical of eBay Chief Executive John Donahoe, the board, and corporate governance at the e-commerce company.<\/p>\n
In his latest missive to fellow eBay shareholders, he said selling off only part of PayPal would retain the benefits of a stand-alone PayPal while maintaining the efficiencies of having eBay and PayPal together.<\/p>\n
“A partial separation of PayPal is not a new idea, and we’re glad to see that Mr. Icahn now seems to agree that a full separation of PayPal is not a good idea,” eBay said in a statement, re-iterating its position that the two businesses are better off under the same umbrella.<\/p>\n
As a public company, the payments firm should also command a higher valuation than as part of a larger corporation, shedding the “conglomerate discount,” Icahn said. Its stock could then also be used to bankroll future acquisitions.<\/p>\n
“Conducting a 20% IPO of PayPal – and creating two dedicated and highly-focused independent businesses – will provide the best opportunity for these businesses to remain competitive over the long-term,” said Icahn, who owns more than 2 percent of eBay.<\/p>\n
EBay bought PayPal for $1.5 billion in 2002.<\/p>\n
The billionaire Icahn said eBay and PayPal could enter into a long-term commercial contract that does not require eBay to own all of PayPal, to preserve their ties.<\/p>\n
He also said PayPal has a significant opportunity to offer new services such as check writing and direct deposits.<\/p>\n
A standalone PayPal and eBay would benefit from having their own independent management teams, Icahn argued.<\/p>\n
PayPal needs to be independent to compete in the mobile payments industry, Icahn said, repeating an assertion he has frequently made in a series of open letters in recent weeks.<\/p>\n
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