Investor Carl Icahn drops call for eBay to sell PayPal

PayPal is eBay's fastest-growing business

Activist investor Carl Icahn has dropped his call for eBay to sell its payments business, PayPal.

The billionaire had been trying to gather support for the proposed split before the e-commerce giant's annual shareholder meeting in May.

But Mr Icahn, who first made the call in January, said it had become clear that several major shareholders would not back the plan.

However, he said he still believed in the merits of a PayPal spin-off.

"I continue to believe that eBay would benefit from the separation of PayPal at some point in the near future," he said in a statement.

As part of the agreement reached on Thursday, Mr Icahn, who owns a 0.8% stake in the firm, has also withdrawn his proposal to add two of his own nominees to eBay's board.

Criticism

But in a concession to the investor, eBay said it would follow his recommendation of adding David Dorman, a founding partner of investment firm Centerview Capital Technology, as an independent director on its board.

Mr Icahn announced his plan after buying a 0.8% stake in eBay

In the weeks after eBay revealed Mr Icahn's proposal, the investor wrote several letters to fellow shareholders questioning the abilities of eBay chief executive, John Donahoe, and calling corporate governance at the company among the worst he had ever seen.

"We are very pleased to have reached this agreement with Mr Icahn...enabling our board and management team to focus our full attention on a goal every shareholder agrees on - growing PayPal and eBay, and delivering sustainable shareholder value," Mr Donahoe said in a statement.

He and other board members, including eBay founder Pierre Omidyar, have repeatedly said eBay had been funding PayPal's growth, and that the two were better off together.

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 revenue rose 19% in the fourth quarter of 2013.