EBay has announced plans to spin off PayPal, its fast-growing payments business, into a publicly traded company in the second half of 2015, marking an about-face for the company.
EBay Chief Executive John Donahoe had previously resisted demands by activist investor Carl Icahn to hive off the service, saying PayPal was integral to eBay's business - and vice versa. Icahn backed off from his demand in April.
However in a statement on Tuesday Donahoe said "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".
After the tax-free spinoff to shareholders, the new eBay will be headed by Devin Wenig, president of eBay Marketplaces and former head of the Markets division of Thomson Reuters.
American Express executive Dan Schulman joins PayPal immediately as president and CEO after the spinoff, the company said.
Donahoe and Chief Financial Officer Bob Swan will oversee the separation and serve on the boards of both companies.
PayPal was founded in the late 1990s and went public in 2002. It was acquired by eBay soon afterward for $1.5 billion.
PayPal had 143 million active users at the end of 2013, up 16 percent from a year earlier.