Top 10 Questions about the eBay-PayPal Separation

eBay Inc. Staff

1. What is the strategic rationale for creating two independent businesses?

The Board believes that the long-term benefits of separation outweigh the benefits of staying together for three key reasons:

  1. Growth Opportunities: Separation positions eBay and PayPal to capitalize on their respective growth opportunities. Becoming independent in 2015 will provide each company with new market and partnership opportunities that would have been more difficult to pursue as a part of the combined entity.
  2. Competitive Edge: The global commerce and payments markets are rapidly changing, and each business faces different competitive opportunities and challenges. We can optimize the synergies with arm’s length operating agreements between the two entities, which can formalize the existing relationships between the two companies and help mitigate potential dis-synergies.
  3. Shareholder Value: The separation will offer shareholders the best path to sustainable shareholder value and will also create two distinct, attractive investment opportunities for eBay shareholders.

 2. What has changed since the proxy contest when you said you were ‘Better Together?’

  • As we have said before, eBay’s Board of Directors regularly reviewed the company’s growth strategies and structures and assessed all alternatives. That’s why we said this was not a new idea. In the past, we concluded that separation was not the right decision.  We also said we would keep an open mind.
  • However, as part of recent assessments, the board has explored separation, specifically whether it would: (1) make eBay and PayPal more competitive; (2) be possible without distracting innovation and execution; and (3) create sustainable value for shareholders over time.
  • For more than a decade, the businesses have mutually benefited from being part of one company, and have served each other and shareholders well together. The growth of both businesses and shareholder value created demonstrate the decision to keep the businesses together to have been the right one.
  • The board explored these three questions and concluded that this is the right time to separate the businesses.

3. How will you keep the synergies that have made the last decade successful?

  • We have done an extensive analysis, and expect these synergies to become less important over time; we intend to structure arm’s length operating agreements that are intended to preserve the existing synergies between the two businesses.
  • We will in due course provide more information on the two companies and our plans for them to operate independently.

4. What new opportunities can the independent companies pursue that were not available to the combined company?

  • It is too early to get into the specifics here and we expect the separation to take up to 12 months to finalize.
  • We believe that, over time, both businesses will have more market and business opportunities with potential partners as independent companies.
  • Both eBay and PayPal will be sharper, stronger, more focused and competitive as leading, standalone companies in their respective markets. They will have added flexibility to pursue new markets and partnership opportunities.

5. When will the separation occur?

The company expects to complete the transaction as a tax-free spin off to be completed in the second half of 2015, subject to market, regulatory and certain other conditions.

6. Will PayPal still be the preferred payment method on the new eBay?

We have no plans at this time to change the experience for buyers and sellers using eBay Marketplaces, which includes offering PayPal as the preferred payment method on eBay.

7. Why is Dan Schulman the right leader to run PayPal?

  • Dan is a seasoned executive in both financial services and mobile technology, with nearly 30 years of senior leadership experience at global, consumer-centric brands, with an emphasis on both payments and mobile technology. He has a proven track record of leading complex corporate negotiations, transitions and investor-centric deals.
  • Dan has deep knowledge of Payments, Mobile, Finance & Tech. His focus on driving customer adoption of digital payments and mobile technology is ideal for the future of PayPal as it navigates a rapidly-evolving industry landscape and focuses on engaging consumers, partnering with merchants and innovating in mobile payments.
  • Dan has deep relevant experience. Since 2010 Dan has served as President of American Express’ Enterprise Growth Group and led the company’s global strategy to expand its alternative mobile and online payment services. Under his leadership, American Express successfully launched its next-generation digital payments platform, developed non-traditional sources of revenue and introduced a suite of payment products to expand the company’s demographic and geographic reach.

    8. What will John Donahoe and Bob Swan’s roles be between now and separation? 

  • John and Bob will both continue to lead the company as CEO and CFO through the transition until separation.  They both have the full support of the Board.
  • As the CEO and CFO of eBay Inc., John and Bob’s primary responsibility to our employees, customers and shareholders is to ensure the successful transition of eBay and PayPal into two strong, independent companies.
  • The board, together with John and Bob, have led the review leading to this decision and are in full agreement with it.
  • John and Bob will be responsible for leading the separation process, making all the appropriate decisions that are needed to put each business on a successful path forward.
  • Post-separation, we expect they will serve on one or both of the boards to provide continuity.

9. What will John and Bob be focused on while the companies are being separated?

  • eBay Inc President and CEO John Donahoe and company CFO Bob Swan will be responsible for leading the separation of each business, with Board oversight.  This includes determining appropriate operating agreements and offering a neutral, but experienced, perspective for decisions affecting both companies long-term.
  • John and Bob will continue to operate as CEO and CFO of the Company until the separation.

10. What is the plan for eBay Enterprise?

We will also be exploring strategic options for eBay Enterprise, including a sale or IPO. Enterprise is a strong business and a leading partner for large retailers, managing mission critical components of their e-commerce initiatives. However, it has become clear that it has limited synergies with either business and a separation will allow both to focus exclusively on their core markets, as we create two independent world class companies.