Tomahawk, WI 08/25/2014 (Basicsmedia) – EBay Inc. (NASDAQ:EBAY) has reportedly been telling potential candidates of its plans to spin-off fast growing payment unit, PayPal, months after billionaire activist investor, Carl Icahn, proposed such a move according to Bloomberg’s Trish Regan.
EBay Inc. (NASDAQ:EBAY) CEO, John Donahoe, has over the past remained firm on a push from Icahn to sell the unit, maintaining that PayPal formed an integral part of the company’s business and vice versa. Bloomberg’s Cory Johnson is also of the opinion that the two entities co-exist with each other and that eBay acquired PayPal as one of the ways of safeguarding its business from the likes of Amazon.com, Inc.(NASDAQ:AMZN).
“[…] so the acquisition of PayPal in the early days wasn’t all about having a superior payment platform. It was about keeping the payment platform that was losing tonnes of money, but they wanted to make sure someone else didn’t fall in the hands of the wrong folks,” said Mr. Johnson.
The spin-off suggestions come amidst concerns that eBay Inc. (NASDAQ:EBAY) might be pulling PayPal behind, in terms of growth such that a spin-off would allow the latter to grow faster. Icahn has always maintained that PayPal cannot attract top talent in the industry attributed to the fact that eBay stock price has not been moving up over the past year; sentiments echoed by Johnson.
“The growth of PayPal would affix to it a much higher growth multiple if it was a separate company. That is to say that eBay Inc. (NASDAQ:EBAY) while it is a great fantastic-business, it is extraordinary profitable growing a ton of free cash flow and growing rapidly, it’s not growing as fast as PayPal particularly on the topline,” said Mr. Johnson.
Johnson believes that eBay business segments have not performed well over the years continue to drag PayPal valuation. During a call, last month with analysts Donahoe reiterated that the company remained focused and open minded in assessing all alternatives that would go a long way in ensuring maximum shareholder value.