eBay Inc (NASDAQ:EBAY) announced in a press release this morning that it is bowing to pressure from activist Carl Icahn, Leon Cooperman, and others by spinning off PayPal into a separate business. Icahn has been pushing for the separation for some time, and eBay’s board of directors showed no signs of caving—until now.

eBay completes strategic review process

The online auction giant has been conducting a strategic review for a while now. eBay’s board decided that separating it from PayPal will best position both companies to capitalize on their separate growth opportunities and create “sustainable shareholder value.”

In a statement, eBay President and CEO John Donahoe said they found that keeping eBay and PayPal together beyond next year becomes less advantageous to both businesses than togetherness was before. He said the two businesses face their own “competitive opportunities and challenges.”

Donahoe added that the two companies will both become stronger and be able to focus more on their own industries while becoming stronger competitors within their respective industries.

eBay Inc Plans PayPal Spinoff; Another Icahn 'Win'

eBay’s plan for separation

The online auction company said that upon separation, eBay and PayPal will create “arm’s length operating agreements “that will better benefit both companies. eBay management plans to finish the transaction in the form of a tax-free spinoff in the second half of next year.

Donahoe and eBay Chief Financial Officer Bob Swan will guide the company through the separation process with the oversight of the board. Neither will play an executive management role in either of the two companies, although both will serve on at least one of the two new companies’ boards.

eBay Marketplaces President Devin Wenig will become eBay’s new CEO after the separation. American Express Company (NYSE:AXP) executive Dan Schulman will go to PayPal immediately and become president and CEO of PayPal after the separation.

What eBay will look like

eBay reminds investors that revenue for the Marketplaces and Enterprise businesses in the last 12 months grew by about 10% year over year to $9.9 billion. eBay Marketplaces made up approximately $8.7 billion of that amount.

The Enterprise segment handled about $85 billion worth of gross merchandise volume and gross merchandise sales, a 13% year over year increase. eBay Marketplaces CFO Scott Schenkel will become the new eBay’s CFO.

eBay spinoff – What PayPal will look like

eBay reported that PayPal has seen its revenue grow 19% year over year to about $7.2 billion and its accounts grow by 15% year over year. The payment services provider facilitates one-sixth of the online dollars spent today, and total payments volume rose 26% to $203 billion.