Even after splitting up later this year, eBay Inc. and payments
unit PayPal will be joined at the hip.
EBay has agreed to ensure that roughly 80% of gross merchandise
sales on its online marketplace are routed through PayPal for the
next five years, as they are today. If PayPal's share dips below
that level, eBay will have to pay its former subsidiary
restitution.
For its part, PayPal has agreed to pay eBay a commission if its
percentage of sales on the marketplace rise above that mark.
The payment arrangement is among the details that emerged
Thursday in a securities filing from eBay as it prepares to cleave
off PayPal in the second half of the year. The filing didn't offer
any additional details on the split's possible timing.
The operating agreement will preserve for six years, including a
one-year transition period, a relationship much as it was before
the split.
EBay Chief Executive John Donahoe, who will leave his post and
become chairman of PayPal, said the accord is designed to give both
firms flexibility. For example, he said either company can
negotiate joint ventures with other firms without approval from its
former partner.
"PayPal is free to pursue any merchant, to pursue an Amazon, an
Alibaba, " said Mr. Donahoe in an interview. "And eBay is free to
bring other payment alternatives onto eBay."
Under pressure from activist investor Carl Icahn, eBay last year
said it would spin off PayPal to create two independent, publicly
traded companies. EBay's separation plan will require approval from
the U.S. Securities and Exchange Commission, which Mr. Donahoe said
he expected.
The agreement forbids eBay from creating its own payments
system, and PayPal from developing a marketplace for selling
merchandise.
EBay Chief Financial Officer Bob Swan also will step down after
the split, though he'll join the eBay board. EBay founder Pierre
Omidyar will have a board seat on both companies. EBay director Tom
Tierney, a former Bain & Co. CEO, is set to become
chairman.
The 54-year-old Mr. Donahoe, also a former Bain & Co.
executive, said he had not determined what he would do after he
steps down as CEO.
EBay generates more profit, but it is growing more slowly than
PayPal and faces continued threats from e-commerce giants
Amazon.com Inc. and Alibaba Group Holding Ltd. It also will have to
overcome a continuing problem with Google Inc.'s search algorithm
that pushes Web-users to other sites.
Meanwhile, PayPal has been on a pace to overtake the eBay
marketplace unit by sales and with more than 160 million active
accounts, has a considerable lead over upstarts like Square
Inc.
EBay is cutting about 2,400 jobs this year in anticipation of
the split and announced a plan to seek a buyer for eBay Enterprise
unit, which helps other companies with their online sales
efforts.
Write to Greg Bensinger at greg.bensinger@wsj.com
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