The plan, to take effect next year, comes after months of pressure from activist investor, Carl Icahn, who had assailed eBay for poor management and claimed that keeping eBay tied with PayPal depressed the value of both units.
An eBay statement on Tuesday said a board review concluded that “a changing competitive landscape creates enormous opportunities for eBay and PayPal” and that “separation will create sharper strategic focus” for each unit.
Company president and CEO, John Donahoe, said the review showed that “keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively”.
PayPal accounted for 41 per cent of eBay’s revenues last year and has more than 152 million active users.
Donahue and CFO, Bob Swan, will lead the transition of both businesses, the statement said, but will not hold executive management roles in the two new companies.
The “new” eBay will be led by Devin Wenig, current president of eBay Marketplaces.
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.
After the announcement, eBay shares leapt 6.8 per cent to $56.22 in late morning trade.