NEW YORK - US online auction giant eBay on Tuesday agreed to shareholders' requests for a split making its highly profitable PayPal brand into an independent company starting next year.
Current eBay shareholders will receive stock in the future PayPal in proportion to their current holdings, the company said in a statement.
The split will give shareholders "more targeted investment opportunities" and will increase the value of the company over the long term, the statement said, without giving more details of the spinoff.
Rumours of a split, which activist investor Carl Icahn had unsuccessfully demanded during the spring, had been circulating since the end of August.
eBay said it had decided to spinoff PayPal after carefully examining several strategic options available and planned to complete the separation in the second half of 2015.
PayPal accounted for 41 per cent of eBay's revenues last year and has more than 152 million active users.
eBay chief executive John Donahue and chief financial officer Bob Swan will lead the transition of both businesses, the statement said. But they will not hold executive management roles in the two new companies, instead serving on one or both boards.
The "new" eBay will be led by Devin Wenig, current president of eBay Marketplaces.
Over the last 12 months, the eBay divisions saw revenues of US$9.9 billion (S$12.6 billion), a 10 per cent rise over the year before.
The independent PayPal will be headed by Dan Schulman, who comes from American Express after holding top jobs at AT&T, Priceline, and Virgin Mobile.
PayPal saw revenues rise 19 per cent to US$7.2 billion in the past 12 months.