eBay CEO John Donahoe spoke with Bloomberg Television's Erik Schatzker today about the company's settlement with Carl Icahn. On how it came about, Donahoe said, "Jimmy Lee, who's the Vice Chairman of JPMorgan, called me last week. He happened to be meeting with Carl on an unrelated topic. He said, look John I think you and Carl should spend more time together. And we did over the weekend. And we talked repeatedly on the phone..."
On what eBay is giving Icahn that other shareholders don't get, Donahoe said, "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."
Video: eBay CEO Donahoe: Dorman a 'Good Addition' to Board
SCHATZKER: As you know, Carl Icahn wanted a PayPal spin off. He wanted two seats on your board. He's getting no spin off and one seat on the board. No doubt John you want to characterize this and you will as a victory for eBay shareholders. But here's what they're all wondering, why give Carl Icahn anything at all?
DONAHOE: 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. And to be clear, Dave Dorman is coming on as an independent director. And an independent director I respect and an independent director Carl respects.
SCHATZKER: Why?
DONAHOE: And so I think that's a good addition to our board and it's one that I think will allow us to continue to execute on the enormous opportunities in front of us.
SCHATZKER: John why didn't you hold out until the annual meeting and give shareholders a chance to decide for themselves?
DONAHOE: Well what shareholders want is, shareholders 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. And so this was, I think a clear win-win for shareholders. And so it's a clear win for our company.
SCHATZKER: Just let me clarify one point, were you unable to execute with the distraction of the proxy battle with Carl Icahn?
DONAHOE: No we were executing just fine. But what this does is it allows us to quite all the distracting noise and focus on the opportunities in front of us so relatively straightforward opportunity to do this. And it's a clear win. I think it's what our investors want. And it's what we as a company want. And now we move ahead focusing on the enormous opportunity PayPal has to capitalize on mobile payments and digital payments.
The enormous opportunity eBay has to capitalize on the commerce, global commerce opportunity in front of us. So we've been driving strong growth and now we will continue to focus strong growth with another strong long-term shareholder in Carl.
SCHATZKER: John tell me more please about the confidentiality agreement. What are you giving to Carl Icahn that other shareholders don't get?
DONAHOE: 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. Which means he's going to be longer term in his orientation.
And so it's relatively straightforward. I'll periodically get together with Carl and listen to him as I would any large shareholder.
SCHATZKER: So--
DONAHOE: So I think it's going to be a win-win.
SCHATZKER: So if any of your other large shareholders, BlackRock for example, Invesco, T Rowe, Wellington, Fidelity, came to you with the same request, you'd give it to them?
DONAHOE: Absolutely. I mean it's, they're our shareholders so if they want to get confidential information and bide by the restrictions that come with that, then we'd be happy to provide it. But in this case that's what Carl wants to do and so that's what we've done.
SCHATZKER: You know that many people see Carl Icahn as a bully. To those folks who still feel that way, explain to them what's the value of letting the fox in the henhouse?
DONAHOE: Oh I don't think it's the fox in the henhouse. Look from the beginning I've had direct conversation with Carl, throughout this process. And in all those conversations he's been respectful; he's been thoughtful in our one-on-one conversations.
SCHATZKER: So respectful, thoughtful, one-on-one but nasty and accusatory in public? I have not negotiated with Carl Icahn so I don't know if that's the way he rolls.
DONAHOE: You know, all I know is in my direct conversation he's been thoughtful. And what's happened in this case is Jimmy Lee who's the Vice Chairman of JPMorgan called me last week. He happened to be meeting with Carl on an unrelated topic. He said, look John I think you and Carl should spend more time together.
And we did over the weekend. And we talked repeatedly on the phone and we focused on not separation or not separation, we focused on the fundamentals of PayPal's business of eBay's business. We focused on the enormous opportunities that are in front of our company. And once we did that we had strong common ground and we'll continue that dialogue going forward.
SCHATZKER: Did Jimmy Lee, was he part of those discussions? Or was that just you and Carl Icahn one on one?
DONAHOE: Well Jimmy just started them and he's a trusted advisor to both Carl and to me. And he encouraged us to spend more time directly together. Which is what we did.
SCHATZKER: John here's, this is an issue I want to raise with you because people are looking at this agreement that you have reached with Carl Icahn and they might look at it this way, all an investor needs now to get a seat or at least an independent board seat and confidential assess at one of America's most respected companies; and I don't think that you could deny that eBay is one of America's most respected companies, with a market cap of $70 billion; is a loud mouth, a Twitter fed, a website and less than 1% of the outstanding shares.
DONAHOE: Well first of all it's 2% of the outstanding shares. So Carl is a large and important investor.
SCHATZKER: Well he started with only .82%.
DONAHOE: Yeah so look. What we've done here is we've added a highly respected independent director. One who meets the criteria of our board. Dave was a Chief Executive of AT&T where he helped drive AT&T's turnaround. He's widely respected for his integrity, for his independence. So he's an independent board member whose qualifications match all of our board. And we welcome Dave to our boardroom. He'll be part of our board dialogue and I look forward to working with him. I've known him for years. He's going to be an outstanding board member.
And our 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. eBay's the clear leader in mobile commerce. PayPal's the clear leader in mobile payments. We're going to focus on growing our business, expanding globally and that's the best way to drive sustainable value for shareholders.
SCHATZKER: What happens when--
DONAHOE: Deliver growth and we'll deliver--
SCHATZKER: What happens when the next activist with just 2% of the outstanding shares, shows up and tries to hold you hostage. What do you give him?
DONAHOE: Look no one's holding anyone hostage. I, all throughout this process, I've been focused on what I believe. Which is the opportunity in front of us, believing that eBay and PayPal are better together. We've been quite clear about why that's the case. Why the synergies are strong and getting stronger. And ultimately I think the facts won the day in this case. And now we're looking forward. So it's, you know, it's a win-win for the company and a win-win for eBay shareholders.
SCHATZKER: John very quickly before you go, you said in your statement today that eBay continues to evaluate strategic alternatives. If that's not going to be a PayPal spinoff, what might it be?
DONAHOE: Well it's the same thing we've always done Erik. We've been evaluating alternatives; the board does it regularly, every year. And so we're going to be capitalizing and just what I've been talking about which is there's an enormous opportunity in the marketplace.
There's a fundamental change in how consumers shop and pay. Largely enabled by mobile technologies. And eBay and PayPal together have been capitalizing on this mobile commerce revolution. And so together we will focus on growing our mobile payments volume. PayPal did $27 billion of mobile payments volume last year, is the clear mobile payments leader.
We'll continue to double down with investments like our Braintree acquisition. Investments like taking PayPal offline. And we'll continue to grow the global eBay business which itself had $22 billion in mobile commerce volume. So we're going to do what we have been doing which is driving innovation and execution which delivers growth which is the best way to drive sustainable shareholder value.
SCHATZKER: Well John there are millions of eBay shareholders and customers who wish you well in that effort. Thank you so much for joining us here on Bloomberg Television. That's John Donahoe; he is the President and CEO of eBay.
