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| eBayNews | 09-01-2009 09:50 AM |
eBay Sells Majority Stake in Skype for $1.9 Billion
eBay has signed a definitive agreement to sell its Skype communications unit in a deal valuing the business at $2.75 billion. The buyer, who will control an approximately 65 percent stake, is an investor group led by Silver Lake and includes Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board. eBay is expected to receive approximately $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million. The company will retain an approximately 35 percent equity investment in Skype. The transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009.
The "Andreessen" of Andreessen Horowitz is Marc Andreessen, who sits on eBay's Board of Directors. Andreessen and Ben Horowitz launched the venture capital firm in June.
eBay acquired Skype in 2005 under Meg Whitman, who crafted the following year's user conference around the theme of "The Power of Three," referring to eBay, PayPal and Skype, evidence she believed Skype would bring the same kind of synergies to eBay as its acquisition of PayPal in 2002. But history showed eBay overpaid for the company, there were no resulting synergies, and in fact, eBay did not even own the underlying technology, according to a licensing dispute with Skype's founders. Current CEO John Donahoe, who took the reigns from Whitman in 2008, viewed Skype as a distraction and initially announced the company would spin off Skype in an IPO.
eBay CEO John Donaoe said in today's press release, "This is a great deal, unlocking both immediate and long-term value for eBay and tremendous potential for Skype. We've acted decisively on a deal that delivers a high valuation, gives us significant cash up-front and lets us retain a meaningful minority stake with talented partners. Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments businesses. As a separate company, we believe that Skype will have the focus required to compete effectively in online voice and video communications and accelerate its growth momentum."
The press release went on to say, "Acquired by eBay in 2005, Skype has strengthened considerably since early 2008 when Donahoe was named eBay’s CEO and tapped company executive Josh Silverman to lead Skype. Silverman has driven strong momentum while building a new management team and delivering a series of Skype innovations such as software upgrades with dramatically improved video and calling quality, the widely popular Skype iPhone app and mobile partnerships with companies such as Nokia and Hutchison. In 2008, Skype generated revenues of $551 million, a 44 percent increase compared to 2007. Total eBay Inc. revenues for 2008 were $8.5 billion. Registered Skype users reached 405 million by the end of 2008, a 47 percent increase from 2007. Skype is attracting hundreds of thousands of new users each week."
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