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August 22, 2014

Could eBay be set to spin off PayPal?

Shares in auction site jump 4.6% on rumours of split.

By Vinod

eBay is reputed to be considering spinning off its online payments arm PayPal as it looks for new ways to attract customers.

According to American tech site The Information, the online auction site, which celebrated 15 years in the UK this week, has reportedly told potential recruits for the position of PayPal CEO that it’s considering splitting off the business as soon as next year, according to two people briefed on the conversations.

Following the revelations, eBay shares rose 4.6% yesterday to close at $55.89 in New York.

The search for a new PayPal head began after previous CEO David Marcus announced he was leaving to join Facebook in June, but the company has so far failed to attract a suitable candidate.

"The Ebay board and management team remain focused on maximizing shareholder value," eBay spokesperson Amanda Miller said in a statement.

"As we discussed during proxy season and in our second quarter financial results call, the board will continue to assess all alternatives to create that long term value and to enhance the growth and competitive positions of both Ebay and PayPal. This position has not changed."

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Any potential spin-off of PayPal would represent a major volte-face for eBay, which earlier this year explicitly resisted calls for such a move from outspoken company investor Carl Icahn.

Ebay chief executive John Donahoe said PayPal was integral to Ebay’s business and a split would not make sense, leading to Icahn later retreating his view, saying that although such a move was not currently suitable, he still supported it happening sometime in the near future.

"We are blessed with two great businesses and will continue to aggressively drive growth for PayPal and EBay," Donahoe said on an analyst call last month.

PayPal has proved integral to eBay’s growth into one of the world’s biggest online retailers, with its revenue increasing 20% last quarter. The company announced an expansion in June that means it is now available to customers and retailers in more than 200 areas around the world.

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