Activist investor Carl Icahn will withdraw both his proposal that eBay Inc. (NASDAQ: EBAY) spin off the company’s PayPal business and his two nominations for candidates for the company’s board of directors in exchange for the appointment of an independent director. The agreement ends a proxy battle that could have heated up eBay’s annual meeting currently scheduled for May 13.

In an appearance Friday morning on Bloomberg Television, eBay’s CEO John Donahoe gave this reason for the deal:

Well it’s something we would offer to any large shareholder. It’s relatively straightforward. Which is the directors and I are free to share any confidential information with Carl and if and when we do so, it makes him an insider. So it actually bounds him by the restrictions that any insider would have.

The new board member is Dave Dorman, former chairman of Motorola and CEO of AT&T, about whom Icahn is quoted in the press release:

We are happy to have reached this détente with eBay and believe that Dave Dorman will be a great addition to the company’s board of directors. As chairman of Motorola, Mr. Dorman, working in tandem with our board nominees, guided the company through the successful separation of its mobile device and home businesses, which greatly enhanced shareholder value.

Then Icahn expands on how to enhance shareholder value:

[Donahoe and I] both strongly believe in the great potential of eBay and PayPal, and I have found a number of his ideas to be extremely compelling. However, I continue to believe that eBay would benefit from the separation of PayPal at some point in the near future and intend to continue to press my case through confidential discussions with the company. While John has made no commitments regarding such a separation, he and I have agreed to meet regularly when he is in New York to discuss strategic alternatives.

Does that sound like Icahn’s giving up a spin-off of PayPal?

Why did Donahoe cave in? His answers to some pointed questions from Bloomberg TV’s Erik Schatzker on that subject were a little vague:

Well I think what Carl Icahn has done is seen the potential in opportunity in our company. And so he’s really becoming a long-term shareholder which I think is a win-win. … [S]hareholders don’t want some distracting proxy battle. Shareholders want me and our leadership team focused on executing in the market. And this is what we now can do. … [O]ur board and the management will now be focused on what all shareholders want, including Carl. Which is capitalizing on the enormous opportunities in front of us. There’s a mobile commerce and a mobile payments revolution happening right now.

Donahoe has declared victory and left the building. As Schatzker pointed out, eBay has allowed the fox into the henhouse.

Investors seem to agree, pushing down eBay shares about 2% in the noon hour Friday to $54.71, in a 52-week range of $48.06 to $59.70.

ALSO READ: Carl Icahn’s Top Holdings: A Look Forward

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.