eBay offloads 65% in Skype for $1.9 bn

MUMBAI: eBay Inc has signed an agreement to sell 65 per cent of Skype Communications to an investor group led by Silver Lake and includes Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board.

eBay will receive $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million, valuing the company at $2.75 billion. eBay had acquired Skype in 2005 for $4.1 billion.

eBay will retain 35 per cent stake in Skype. “This is a great deal, unlocking both immediate and long term value for eBay and tremendous potential for Skype,” said eBay Inc president and CEO John Donahoe. “We have 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 ecommerce and online payments businesses.”

Skype as a separate company will have the focus required “to compete effectively in online voice and video communications and accelerate its growth momentum.”

The transaction is expected to close in the fourth quarter of 2009, the company said in a statement.

In April 2009, eBay had announced plans to separate Skype from the company, beginning with an IPO in 2010. The decision followed a year long review of Skype within eBay‘s portfolio. As it prepared for an IPO, the company said it would naturally consider bids for Skype that offered an attractive valuation. Donahoe said the deal offered by the investor group achieved that.

“This deal achieves our goal of delivering short and long term value to eBay and its stockholders, without the possible delays and market risk of an IPO,” Donahoe added. “Selling Skype now at this great valuation, while retaining an equity stake, makes sense for the company. And it allows us to focus all of our energies on the opportunities in front of PayPal and eBay.”Skype is a software that enables conversations over internet. Many individuals and businesses use Skype to make free video and voice calls, send instant messages and share files with other Skype users. It is also used to make low cost calls to landlines and mobiles.

Silver Lake MD Egon Durban said, “This transaction benefits all parties involved and will allow Skype the opportunity to accelerate the growth of its business by harnessing the deep technological and company development expertise that resides within the investor group.”