EBay will spin off PayPal into its own business starting next year.

PayPal, the online payments juggernaut, is seen as the real crown jewel of the eBay business. And investors have been clamoring for a way to unlock PayPal's value.

EBay's stock shot up 11% on the news.

The activist investor Carl Icahn in particular has been a big advocate of spinning off PayPal.

Carl Icahn. AP Images



The New York Times explains why a spinoff was favored from Icahn's perspective:

PayPal was a central focus of a lengthy battle between eBay and Mr. Icahn, who demanded a spinoff of the unit as a way to generate value for shareholders. Such a move, the hedge fund billionaire contended, would highlight PayPal’s own strengths while letting its management team and eBay’s focus on their own core businesses.

And creating a separate board for PayPal could help remove what Mr. Icahn argued were conflicts of interest with the payment processor’s parent.

In the announcement, eBay said that a recent strategic review of the company determined that both eBay and PayPal would be better off with a sharper focus and that the benefits of being together in the past were likely to fade.

According to the press release, PayPal revenue grew 19% over the past year to $7.2 billion. The announcement also says that PayPal facilitates one in six dollars spent online. EBay revenue (excluding that of PayPal) is still a little bigger ($9.9 billion), but growth is much slower.

This slide from the presentation has the core summary of what's going on.





And this slide shows what an incredible run PayPal has had over the past decade.





Here's the full press release ...

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eBay Inc. to Separate eBay and PayPal into Independent Publicly Traded Companies in 2015