Carl Icahn targets Paypal sale as he ups eBay stake

Ebay is under attack from activist investor Carl Icahn, who is nominating two of his employees to the board of the internet marketplace in a campaign to force the sale of its online payments business PayPal.

Icahn bought a 0.82% stake in eBay earlier this month, which is now worth over $570m, the company said in a statement on Wednesday. Shares jumped as much as 12% in extended trading after the company disclosed Icahn's stake, eventually rising to $57.47 from the $54.41 closing price in New York.

"We've done a lot of work on eBay and we believe without question it's a no brainer that PayPal should be spun off," Icahn told Bloomberg. "There is no reason why they should be together at this point ... it would be helped by a management team that is separate, and I think the multiple would go up dramatically and also the health of the company would be better."

Ebay chief executive John Donahoe tweeted that he had spoken with Icahn to hear his views, but insisted that PayPal was more valuable as a part of the larger group. In a letter to staff, Donahoe urged employees not to be distracted by Icahn's proposals, saying:

"We believe strongly that PayPal and eBay are far more valuable together than apart. The synergies are clear. PayPal has succeeded because it is part of eBay, not in spite of it. Ebay accelerates PayPal's success, providing tens of millions of customers who then help PayPal grow ... and eBay funds PayPal's growth. This enables PayPal to invest aggressively in mobile, credit and acquisitions."

PayPal is growing faster than its parent company, with revenues up 19% last year, comfortably ahead of eBay's 12% increase, according to full year results released Wednesday.

PayPal processed payments worth $180bn in 2013, dwarfing trading on eBay, which totalled $76bn, but revenues from the marketplace are still larger at $8.3bn compared with $6.6bn for PayPal.

Ebay is the latest Silicon Valley name to be targeted by Icahn. The American investor has bought $3bn of shares in Apple and hopes to persuade the iPhone maker to return a greater share of its cash reserves to shareholders. Icahn has also increased his stakes in Hewlett-Packard and Microsoft.