Tags: Case | eBay | PayPal | separation

Steve Case: eBay's Split With PayPal Could Make Them Both Takeover Targets

By    |   Tuesday, 30 September 2014 12:36 PM

After months of prodding by activist investor Carl Icahn, eBay has decided to split PayPal and the rest of the company into two publicly traded corporations next year.

Former AOL CEO Steve Case and other industry experts tell CNBC the move could make both companies acquisition targets.

Case thinks the separation should have happened years ago. "The payment space has been hyper-competitive. I think a separated PayPal will be more able to focus on that," he notes.

"The value of each as separate entities is greater" than staying together.

Piper Jaffray senior research analyst Gene Munster tells CNBC that Chinese Internet titan Alibaba, which went public earlier in the month, might swoop in to buy eBay marketplace.

Alibaba would be less interested in PayPal because it already has its own online payment division, Alipay, he maintains.

Munster downgraded his rating on eBay Sept. 10 to neutral from overweight and cut his price target to $55 from $63.

eBay shares traded at $56.63 Tuesday midday, up $3.97, or 7.5 percent, from Monday.

Morningstar analyst R.J. Hottovy was enthusiastic about eBay before the split news and remains so afterward. He estimates fair value at $63.

"Our wide moat rating is unchanged, as we have previously stated that each entity possesses a strong enough network effect on a stand-alone basis to warrant a wide moat," Hottovy writes on Morningstar.com.

"Although we previously had concerns that a separation of PayPal might disrupt the combined network effect, we believe the shared services agreements will preserve the synergies between the businesses while allowing each segment to enhance their respective network effects."

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After months of prodding by activist investor Carl Icahn, eBay has decided to split PayPal and the rest of the company into two publicly traded corporations next year.
Case, eBay, PayPal, separation
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2014-36-30
Tuesday, 30 September 2014 12:36 PM
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