Icahn backs down from demand that eBay spin off PayPal

Apr 11 2014, 21:42 IST
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Icahn backs down from demand that eBay spin off PayPal

(Adds background on previous Icahn campaigns, eBay negotiations, byline)

By Deepa Seetharaman, Phil Wahba and Nadia Damouni

SAN FRANCISCO/NEW YORK, April 10 (Reuters) - Carl Icahn backed off calls for eBay Inc to spin out its fast-growing PayPal payments unit on Thursday, after the billionaire investor failed to drum up support from the e-commerce company's major shareholders.

Icahn withdrew his two nominees to eBay's board ahead of the company's annual meeting in May. But in a concession to the famously pugnacious activist investor, eBay added David Dorman, a founding partner of investment firm Centerview Capital Technology, as a 10th independent director.

The settlement caps a months-long acerbic war of words and marked a reversal for Icahn, who had accused eBay Chief Executive Officer John Donahoe of "inexcusable incompetence" and attacked the company's board repeatedly for shoddy governance.

He appeared to soften his stance on Thursday, saying he found several of Donahoe's ideas "compelling" and looked forward to working with eBay's board.

In an interview with Reuters, Icahn said he might add to his eBay holdings. He added that while he supported a PayPal split in the near future, now was not the time.

"If they did the split-up now, yes, the stock would go up," Icahn said. "But I am looking at it and think, 'Why do it now?' I think the stock is very undervalued."

Icahn emphasized to CNBC that he "did not capitulate" to eBay. He and Donahoe will meet regularly to discuss strategic alternatives for PayPal, now eBay's fastest-growing business.

The billionaire told CNBC that his perspective shifted during talks with major eBay shareholders who did not to see eye to eye with him about a PayPal spinoff. They also threw their support behind Donahoe, Icahn said.

Icahn, who owns more than 2 percent of eBay, also said he greatly respected Dorman, a former AT&T Inc CEO and current chairman of CVS Caremark Corp. Dorman has known venture capitalist and eBay director Marc Andreessen for years.

"I am tickled pink to welcome my old friend David Dorman to the eBay board!" Andreessen said in a tweet.

Shares of eBay tumbled 3.2 percent to $54.08 at Thursday's close, during a selloff in tech stocks that drove the Nasdaq Composite Index down 3.1 percent.

GOING UP AGAINST THE VALLEY

Icahn has successfully pushed for change at companies like Forest Laboratories Inc, but has not always been able to replicate that success in the technology

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