Breaking News: eBay to Split PayPal Business off Next Year

The online auction site eBay is planning to split off its payments system PayPal into a separate company next year.

It expects to do that in the second half of 2015.

EBay’s chief executive John Donahoe said: “A thorough strategic review… shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively.”

PayPal’s revenues are growing at 19% a year, twice as quickly as eBay’s.

Its payment system is available in 203 markets worldwide and is expected to process 1 billion mobile payments this year.

PayPal’s annual revenue is $7.2bn (£4.5bn), while eBay’s is $9.9bn and is growing at 10% a year.

The move marks a reversal of strategy for the company.

Mr Donahoe, said: “The industry landscape is changing, and each business faces different competitive opportunities and challenges.”

Earlier this year the activist investor, Carl Icahn, began pressing for eBay to sell PayPal, a plan that was resisted by the eBay board. He stopped pushing after failing to gain enough support.

EBay’s shares were 11% ahead of the official start of trading in New York.

EBay bought PayPal in 2002 for $1.5bn (£905m), and the payments company is now the Silicon Valley firm’s fastest-growing business, with 143 million active users at the end of 2013, up 16% from a year earlier.

PayPal’s new president and chief executive will be the current American Express co-executive Dan Schulman.