An elaborate plan is underway that will ensure that PayPal has predictable for the next five years after its separation from the parent eBay Inc (NASDAQ:EBAY). The separation is expected to happen later this year, although it was announced some six months ago following pressure from activist investor Carl Icahn. The agreement will also prevent companies from directly competing with each other after the split.
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eBay Inc (NASDAQ:EBAY) is drawing up an agreement that will guarantee PayPal five years of reliable revenue. The five-year revenue plan is part of the efforts by eBay to ensure that each of the companies is able to operate smoothly post the split. According to eBay’s CEO, John Donahoe, their guiding principle in the revenue plan is about ensuring continuity for their customers – both consumers and merchants. They also aim to make the resulting entities more stable and flexible to take on whatever challenges they may encounter in the near future.
The initial board members of PayPal have also been unveiled. eBay Inc (NASDAQ:EBAY)’s CEO, Donahoe will become the chairman of the board of PayPal. He will be joined on the board of the payment services company by eBay’s founder, Pierre Omidyar, who will sit on the boards of both eBay and PayPal. Thomas Tierney, a current director of eBay, will become the chairman of the board of the marketplace company and eBay’s CFO, Bob Swan, will also get a seat on the board of the marketplace business.
PayPal set loose to make deals
eBay Inc (NASDAQ:EBAY) is spinning off PayPal so that the online payment service can have a life of its own and possibly do business with eBay’s rivals that have currently shied away from dealing with it because of competition. A standalone PayPal is expected to be in a better position to forge payment deals with other companies such as Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) as well as other financial firms.
The agreement between eBay Inc (NASDAQ:EBAY) and PayPal will prevent either company from venture into businesses that put them in direct competition. In other words, eBay will not be able to form a PayPal-like payment service. Similarly, PayPal will not venture into marketplace business. However, eBay will have leave to pursue payment service business if PayPal is bought by competitor.