PayPal and eBay are going to split up, with the former to be spun off as a new company next year, effectively almost breaking eBay in half at least in terms of revenue.
The split comes almost exactly 12 years after eBay snapped up PayPal, and follows rumours which circulated last month that this would be the next move for the auction giant.
eBay previously announced its intentions to potential PayPal CEO candidates, and all this falls in line with investor Carl Icahn's wishes to separate the payment service.
PayPal is currently thriving, with its revenue having increased by almost 20 per cent in 2013 – and it represents a hulking 40 per cent of eBay's takings. However, PayPal is under threat from alternative digital payment systems, the most recent spectre unleashed being Apple Pay (which comes hand in hand with the new iPhones over in the States – a powerful ally if ever there was one).
With PayPal standing on its own, the company will be able to attract top names for its executive positions (hence why potential CEOs were being told about the move previously), and better fight its corner against the likes of Cupertino (major execs are unlikely to go for running a subsidiary).
Forbes reports that eBay president and CEO John Donahoe commented: "A thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively."
Donahoe had previously argued against Icahn's view, but has obviously changed his mind, and is set to step down as eBay CEO (but will keep a seat on the boards of both firms). Devin Wenig, the current president of eBay's Marketplaces business, will take over as eBay CEO, and Dan Schulman is to head up PayPal (former president of American Express).
eBay shares are currently up strongly, with a movement of 7.3 per cent upwards as of the time of writing this article, so investors clearly agree with Icahn that the two companies will do better apart.