SAN JOSE, Calif.--(BUSINESS WIRE)--
In response to false and misleading information being disseminated by an
activist shareholder about the company's 2009 divestiture of Skype, eBay
Inc. today reiterated previously disclosed public information. "The
Truth About Skype" details the company's acquisition of Skype, its
decision to divest the business and Skype's ultimate sale to Microsoft
in 2011. The "Truth About Skype" demonstrates eBay Inc.'s track record
of acting in the best interests of shareholders and the company's
long-term health.
The Truth About Skype
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eBay Inc. acquired Skype in 2005 for $2.6 billion.
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In 2007, eBay Inc. took a $1.4 billion write-down of Skype,
acknowledging that the acquisition had not performed as expected.
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In 2009, (John Donahoe became eBay Inc.'s President and CEO in 2008),
the company's board decided to divest Skype due to a lack of synergies
with the company's core businesses and its focus on commerce.
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A process was launched to divest Skype. Challenges were widely
reported in media, including IP litigation and other issues faced by
Skype.
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eBay explored an IPO and a sale of Skype, contacting multiple
financial and strategic buyers.
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In September 2009, after an exhaustive process, eBay sold a majority
stake in Skype to an investor group led by private equity firm Silver
Lake. Other investors included the Canadian Pension Plan Investment
Board. The deal valued Skype at $2.75 billion, more than the company
had paid for Skype in 2005.
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eBay retained a 30% stake in Skype, ensuring potential upside to any
future value creation.
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The transaction was applauded -- eBay's sales price was deemed to be
robust. Here's what others had to say:
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The Economist Intelligence Unit:
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"Rewind to earlier this year, when eBay said it planned to
spin off the world's biggest provider of web telephony with an
IPO (initial public offering) in the first half of 2010. That
was read by many as a sign that eBay wanted to unload Skype
after failing to integrate the company into its core
operations, and was now soliciting bids to cut its losses. At
the time, industry watchers predicted eBay would not get
anywhere near the US$2.6bn it paid for Skype, whose software
makes it possible to make free telephone calls over the web,
in 2005. They were proved wrong this week when Skype
transferred control to a consortium that includes the Canada
Pension Plan (CPP) and private-equity firms Index Ventures and
Andreessen Horowitz (co-owned by Netscape founder Marc
Andreessen) in deal that values Skype at US$2.75bn."
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"For all its challenges, however, Skype's future is far more
promising as a stand-alone operation with new management than
as money pit pulling down eBay's bottom line." ("Reversal of
Fortune," The Economist Intelligence Unit, 9/3/2009)
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Joe Nocera, The New York Times:
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"Many people on Wall Street — and a number of
telecommunications experts I spoke to — were stunned by the
price Skype sold for, and not just because we are in the
middle of a recession."
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"Many potential buyers had walked away, believing that eBay
simply wanted too much." ("The Cloud Hanging Over Skype," Joe
Nocera, The New York Times, 9/4/2009)
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The New York Times: the sale was "at a valuation higher
than many analysts had thought possible" and a "partial redemption
for a deal that many Internet analysts said was an awkward fit."
("In a Sale, Skype Wins a Chance to Prosper," Brad Stone, The
New York Times, 9/3/2009)
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The Wall Street Journal's Heard on the Street: "a higher
price for Skype than many expected" but noted that the investor
group faced challenges in profiting from its investment given the
price paid for Skype ("eBay Manages to Pull Off Lucky Eskype,"
Martin Peers, The Wall Street Journal, 9/2/2009).
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Sanford Bernstein: a "great price" (quoted in "In a Sale, Skype
Wins a Chance to Prosper," The New York Times, 9/3/2009).
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A portfolio manager at Thrivent Financial, an institutional eBay
shareholder: "good deal" for eBay; "It shows management is focused
back on the core business [of e-commerce], and that they're making
the right moves," ("EBay Sells Skype to Investor Group," Geoffrey
A. Fowler and Cassell Bryan-Low, The Wall Street Journal,
9/2/2009).
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An investor group that included Silver Lake Partners and the Canada
Pension Plan Investment Board purchased a majority stake in Skype for
$1.9 billion in cash and a $125 million note (eBay retained a 30%
stake in Skype).
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As the lead equity investor, Silver Lake Partners led the
negotiations for this consortium.
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As part of this group, Andreessen Horowitz owned approximately 3%
of Skype, after contributing about $50 million of cash to the
consortium.
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Marc Andreessen recused himself from the eBay deliberations on the
transaction.
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Skype's significant intellectual property litigation was settled,
among other changes.
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In May 2011, all of the equity in Skype was sold to Microsoft for $8.5
billion. Due to eBay's 30% stake at the time of sale, the company
realized a net gain of $1.4 billion on its original investment in
Skype.
Icahn v. Reality
#1 Icahn Made-Up Fact:
The eBay board "gave away $4.5 billion to a board member."
Real Facts
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Nothing of the sort occurred.
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The Silver Lake-led consortium, in which Andreessen-Horowitz held only
a 3% interest, sold their stake of Skype to Microsoft for almost $6
billion, less what they paid for it, for a gain of slightly less than
$4 billion for the consortium.
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The gain occurred following the settlement of substantial litigation
involving Skype.
#2 Icahn Made-Up Fact:
Marc Andreessen "bought 70% of Skype."
Real Facts
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Andreessen Horowitz was part of an investor group that purchased 70%
of Skype in 2009 ("Skype Investors Will Reap From Sale to Microsoft,"
Spencer E. Ante, The Wall Street Journal, 5/11/2011:
"Andreessen Horowitz invested about $50 million" and was "the smallest
shareholder, at 3%."; "Confirmed: eBay Sells Skype in Deal Valuing it
at $2.75 Billion," Robin Wauters, TechCrunch, 9/1/2009: "The acquiring
party is indeed an investor group led by private equity firm Silver
Lake Partners, who likely paid the bulk of the amount Skype was sold
for. Other investors include VC firms Andreessen Horowitz and Index
Ventures (a previous investor in Skype), as well as the Canada Pension
Plan (CPP) Investment Board."; eBay 9/1/2009 8-K: "Mr. Marc L.
Andreessen, a member of the board of directors of eBay, is a general
partner of Andreessen Horowitz, which will own less than 5% of the
Buyer.").
#3 Icahn Made-Up Fact
The Skype transaction "preempted a planned Skype IPO."
Real Fact:
The Board explored many avenues to de-risk their Skype investment,
including a potential IPO. The Silver Lake deal was the most attractive
path.
#4 Icahn Made-Up Fact
The investor group flipped Skype to Microsoft for a large profit at the
expense of eBay's shareholders.
Real Facts
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Following the partial divestiture of Skype, a number of changes
occurred which resulted in enhanced value to all of Skype's
shareholders, including eBay. Management was overhauled, and the
product development cycle was sped up (see "Silver Lake Partners Wins
$2.9 Billion Skype Payday," Brad Stone, Bloomberg Businessweek,
May 11, 2011).
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With those changes in place, Skype was sold at an attractive
valuation, which benefited eBay shareholders. eBay had the foresight
to maintain a substantial 30% stake in Skype so that eBay investors
could benefit from potential upside while mitigating downside risk and
removing the need to manage and invest in Skype.
#5 Icahn Made-Up Fact
"Andreessen is buying companies from eBay," and Mr. Andreessen
"purchased large stakes in two former eBay subsidiaries."
Real Fact
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Mr. Andreessen has not bought a single company from eBay.
#6 Icahn Made-Up Fact
Marc Andreessen "has made investments in and actively advised, no less
than five direct competitors of eBay" [Boku, Coinbase, Dwolla, Jumio,
and Fab] . . . How can Mr. Andreessen be trusted to objectively advise
Mr. Donahoe and the eBay Board about the strategic direction of PayPal
when he has vested interest in so many of its competitors?"
Real Facts
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Mr. Andreessen is a founding partner in Andreessen Horowitz Ventures,
one of the most successful and respected venture capital firms in
Silicon Valley. As such, he brings extraordinary insight, expertise
and leadership to the Company.
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VC representatives generally may have investments in other companies
in similar or related fields and may sometimes raise potential
conflicts. Rather than banishing valuable directors like Mr.
Andreessen from their boardrooms, companies like eBay prefer to manage
potential directors' conflicts through scrupulous governance practices
and full transparency.
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When his board nominees' venture capital or other connections created
some conflicts, Carl Icahn has argued forcefully that a board would
have to manage if they were elected by shareholders. Contrary to
Icahn's tune today -- that a venture capital director cannot be
"trusted to objectively advise" a board if he or she has potential
conflicts -- Icahn, in 2011, provided the following information to
shareholders of another company in response to questions raised about
whether his director nominees were conflicted due to their service on
competitors' boards:
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In defense of his nominees: "[P]otential conflicts of interest are
by no means rare, though, and seem to be especially frequent among
technology and biotech companies. Each of those fields tends to be
intensely technical by nature, and corporations involved in those
areas often find that it is useful to have a board of directors
with significant experience in those areas, which means that at
least minor conflicts of interest often arise. In addition, these
firms are frequently funded by venture capital; the venture
capital firms invariably put their own directors on the boards;
and those directors or their firms often have direct and material
conflicts of interest because they usually fund/control
potentially competitive corporations as well." (1)
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On his nominees' potential conflicts: "The biopharma industry has
standard practices on how to deal with potential director
conflicts regarding business development opportunities. Directors
simply recuse themselves in the event of a vote or decision that
may present a conflict. The benefit of drawing upon knowledge and
experience from shared, collective service on multiple biopharma
boards heavily outweighs the potential conflict in these rare
situations which are easily managed through recusal." (2) Icahn
also approved walling off directors as a sufficient way to address
a conflict: "A general set of ‘best practices' has evolved for
dealing with [conflicts of interest]," and can "be dealt with by
the methods used by thousands of other public and private
corporations" and handled "with professionalism and very little
fuss and bother. . . . Given the ubiquity of such conflicts, as
well as similar situations in which directors or senior management
might have conflicting interests, a general set of "best
practices" has evolved for dealing with them. The first, and
perhaps most important measure is that the existence of the
potential conflict needs to be disclosed by the director to the
board. Here, of course, that has already been done. Second, the
directors should determine, on a case by case basis, whether they
should wall themselves off from conflicted directors when making a
decision with respect to a conflicted transaction." (1) "[T]o the
extent these potential conflicts of interest actually exist, they
are routine matters with which corporate boards of directors
normally deal and pose no significant issues." (1)
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"[A]n appropriate conflicts and recusal policy similarly could
ameliorate any information-sharing concerns that might
theoretically arise from interlocking board members." (1)
Sources: (1) Icahn and his affiliates filed two opinions of legal
counsel as supporting proxy materials in his proxy fight for Forest
Laboratories Inc. (Letter from Ashby & Geddes, Counsel to Icahn Capital
LP, 8/7/2011, http://www.sec.gov/Archives/edgar/data/38074/000092847511000188/frxdfan14a081111.txt;
Letter from Arnold & Porter LLP, Antitrust Counsel to Icahn Capital LP,
8/7/2011, available at http://www.sec.gov/Archives/edgar/data/38074/000092847511000179/frxdfan14a080811ap.txt).
(2) Open Letter from the Icahn Group to Forest Laboratories
Shareholders, 4/7/ 2011, http://www.sec.gov/Archives/edgar/data/38074/000092847511000174/frxdfan14a080811.txt.
Important Additional Information
eBay Inc., its directors and certain of its executive officers are
participants in the solicitation of proxies from stockholders in
connection with eBay's 2014 Annual Meeting of Stockholders. eBay intends
to file a proxy statement and WHITE proxy card with the U.S. Securities
and Exchange Commission (the "SEC") in connection with such
solicitation. EBAY STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ ANY SUCH
PROXY STATEMENT (INCLUDING ANY AMENDMENTS AND SUPPLEMENTS) AND
ACCOMPANYING WHITE PROXY CARD WHEN THEY BECOME AVAILABLE AS THEY WILL
CONTAIN IMPORTANT INFORMATION.
Information regarding the names of eBay's directors and executive
officers and their respective interests in eBay by security holdings or
otherwise is set forth in eBay's proxy statement for the 2013 Annual
Meeting of Stockholders, filed with the SEC on March 18, 2013. To the
extent holdings of such participants in eBay's securities have changed
since the amounts described in the 2013 proxy statement, such changes
have been reflected on Initial Statements of Beneficial Ownership on
Form 3 or Statements of Change in Ownership on Form 4 filed with the
SEC. Additional information can also be found in eBay's Annual Report on
Form 10-K for the year ended December 31, 2013, filed with the SEC on
January 31, 2014.
These documents, including any proxy statement (and amendments or
supplements thereto) and other documents filed by eBay with the SEC, are
available for no charge at the SEC's website at www.sec.gov
and at eBay's investor relations website at http://investors.ebayinc.com.
Copies may also be obtained by contacting eBay Investor Relations by
mail at 2065 Hamilton Avenue, San Jose, California 95125 or by telephone
at 866-696-3229.
About eBay Inc.
eBay Inc. (NASDAQ: EBAY) is a global commerce and payments leader,
providing a robust platform where merchants of all sizes can compete and
win. Founded in 1995 in San Jose, Calif., eBay Inc. connects millions of
buyers and sellers and enabled $212 billion of commerce volume in 2013.
We do so through eBay, one of the world's largest online marketplaces,
which allows users to buy and sell in nearly every country on earth;
through PayPal, which enables individuals and businesses to securely,
easily and quickly send and receive digital payments; and through eBay
Enterprise, which enables omnichannel commerce, multichannel retailing
and digital marketing for global enterprises in the U.S. and
internationally. We also reach millions through specialized marketplaces
such as StubHub, the world's largest ticket marketplace, and eBay
classifieds sites, which together have a presence in more than 1,000
cities around the world. For more information about the company and its
global portfolio of online brands, visit www.ebayinc.com.
Investor Relations Contact:
Tracey Ford
tford@ebay.com
Tom
Hudson
thhudson@ebay.com
or
Media
Relations Contact:
Amanda Miller
press@ebay.com
or
Investor
Information Request:
408-376-7493
or
Company News:
http://www.ebayinc.com/news
or
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Relations website:
http://investors.ebayinc.com
Source: eBay Inc.
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