As Carl Icahn continues to wage a media war, calling into question the ethics of eBay Inc (NASDAQ:EBAY)’s board members, the e-commerce company today issued a letter to shareholders that stuck to Icahn’s original investment thesis: the breakup of PayPal from eBay. In that letter eBay flatly rejected what had appeared to be a concession on the part of Icahn.

carl icahn Ebay

Proposal “nothing new”

Setting up a May 13 showdown at the annual shareholder’s meeting, eBay Inc (NASDAQ:EBAY)’s board fired back at Icahn’s proposal to spin off PayPal from eBay, noting that Icahn’s proposal is “nothing new” and the board said it had considered financial modeling separating PayPal, but it didn’t make sense.

“Our commerce and payments businesses reinforce and support each other. Taking them apart would destroy value by reducing their considerable synergies, which cannot be easily replaced by arm’s length commercial agreements,” the letter said, noting that eBay delivers close to 30% of PayPal’s new customers “at virtually no cost,” which generates “more than 30% of PayPal’s revenues and approximately 50% of PayPal’s profits.”

Letter notes Icahn backing off original proposal

Noting that Icahn recently backed away from supporting his own proposal, instead proposing a partial spin of PayPal, eBay Inc (NASDAQ:EBAY) was sarcastic but firm. “We’re glad to see that Mr. Icahn now seems to agree that a full separation of PayPal is not a good idea,” the letter said, and then addressed the rather personal attacks Icahn has engaged in. “Rather than debate the merits of his proposal, Mr. Icahn has launched an aggressive media campaign to attack the management and directors of eBay. His distorted attacks, despite being the centerpiece of his campaign, have been disproven by the facts. Mr. Icahn has a long history of using personal attacks as a means to his own ends. We believe his public attacks have been counterproductive and are an attempt to distract attention from eBay’s long track record of delivering results for eBay’s shareholders.”

Showdown apparent as compromise unlikely

eBay Inc (NASDAQ:EBAY) then launched into an attack of its own on Icahn’s proposed board members.  While avoiding any personal attacks of the proposed board members’ ethics, the letter noted they were “overboarded,” serving as directors on four boards, and lacked any relevant experience in the technology industry that would propel the company’s performance going forward.

Noting company performance, the eBay Inc (NASDAQ:EBAY) board considered the hot topic in e-commerce then addressed eBay’s overall performance. “PayPal’s mobile payments volume increased 36 times,” the letter noted, with eBay reaching $22 billion and PayPal hitting $27 billion in mobile commerce volume in 2013.  The letter, penned by board members Pierre Omidyar, an eBay founder, Thomas Tierney, the lead independent director, and John Donahoe, eBay CEO, noted 14% year-over-year revenue growth, 15% year-over-year non-GAAP earnings per share growth and $3.7 billion in free cash flow, which demonstrates the firm is “on the right path.”

Sending a signal that a showdown is in the offing, the letter said: “Mr. Icahn is wrong about the quality of our board and he’s wrong about the best course today for PayPal,” the letter said. “We oppose his unqualified board nominees, and we recommend that shareholders vote against his non-binding proposal to separate PayPal from eBay Inc (NASDAQ:EBAY).”