EBay spins off Skype in $2B US deal

Online retailer eBay Inc. is spinning off its Skype internet phone division in a deal worth more than$2 billion USwith an investor group that includes the Canada Pension Plan Investment Board.

EBay saidTuesday it was selling65 per cent ofSkype to agroup led by investment firm Silver Lake and including Index Ventures, Andreessen Horowitz and theCPP Investment Board. Andreessen Horowitz is run by Netscape co-founder Marc Andreessen.

EBay is expected to receive about$1.9 billion US in cash on the completion of the sale, plusa note worth$125 million US. The deal values Skype at $2.75 billion US.

The online retailer will retain the remaining 35 per cent stake in Skype.

The Globe and Mail has reportedthat the CPP, which invests retirement funds for Canadians invested$300 million for a 15 per cent stake in Skype.

The sale is expected to close in the fourth quarter of 2009.

EBay said earlier this year it was looking to spin off its Skype unit in the first half of 2010 through an initial public offering, unwinding the $2.6-billion US acquisition it made in 2005.

The company took a $900-million writedown on Skype in 2007, essentially acknowledging it had significantly overvalued it. Analysts said the announcement was a sign the unit was for sale.

Skype has been one of the areas of growth for eBay of late, with revenue jumping 25 per cent to $170 million in the last quarter.

Skype's software lets consumers use computers and mobile phones to talk to each other for free and make discounted calls to other cellphones and landlines, turning voice calls into data that can be sent over the internet.

But Skype's and eBay's core businesses didn't overlap, making the combined company an uneasy fit.

EBay was also trying to resolve a dispute with Joltid Ltd., the company founded by Skype founders Janus Friis and Niklas Zennstrom that owns the peer-to-peer technology that Skype licenses for its software.

"This is a great deal, unlocking both immediate and long-term value for eBay and tremendous potential for Skype,"eBayCEO John Donahoe said in a release.

"Skype is a strong stand-alone 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," he said.