EBay has sold a 65 per cent stake in Skype to a private investment group in a deal that values the internet telephony business at $2.75 billion (£1.7 billion).
The online auction company bought Skype in 2005 for a price that exceeded $3.1 billion. The company will get $1.9 billion in cash from investors led by Silver Lake, the Silicon Valley private equity firm, and will retain a 35 per cent holding.
Admitting that the purchase was a bad strategic fit, the auction company announced plans in April to spin off Skype next year. EBay, which wrote down about $1.43 billion of its investment in Skype in 2007, let it be known that it was looking for more than $2 billion.
The other members of the consortium are the London-based Index Ventures, an early investor in Skype; the Canada Pension Plan Investment Board; and Andreessen Horowitz, a new venture capital firm founded by Marc Andreessen, a Netscape co-founder. Mr Andreessen is an eBay board member.
Skype’s business stagnated after its purchase by eBay even as user numbers soared. But the company refocused itself last year under Josh Silverman, an eBay executive, and earned revenues of $551 million, a 44 per cent increase compared with 2007. Skype has 481 million registered users and eBay has said that Skype is expected to make more than $1 billion in 2011.
Advertisement
Skype, which has its headquarters in Luxembourg, bypasses the standard telephone network by channelling voice and video calls over the internet. It allows users to call other Skype users free and provides the ability to connect with landlines or mobile devices at low rates. Skype accounted for 8 per cent of all international calling traffic last year, according to TeleGeography Research.
EBay had hoped to use Skype’s technology to increase sales of its auction business by enabling buyers and sellers in its online marketplace to talk to one another. However, investors questioned the synergies and the deal reached yesterday will end an uneasy four-year tie-up.
John Donahoe, the president and chief executive of eBay, said: “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.”
The deal leaves eBay to focus on PayPal, its electronic payments service, as well as its flagship e-commerce site.
Colin Sebastian, a Lazard Capital Markets analyst, said: “Skype is a viable standalone business. It has clear market-share leadership and the margins have turned positive.”
Advertisement
The 2005 sale made billionaires of Janus Friis and Niklas Zennstr?m, the creators of Skype. They approached private equity firms in Silicon Valley this year to try to buy back the company but could not meet eBay’s valuation.
EBay failed to buy the core technology for Skype when it purchased the company, licensing it from Joltid, the founders’ company, instead. Last month eBay said in a regulatory filing that a legal dispute over its use could see the phone service close. However, people familiar with the deal said that Skype’s new owners were not deterred by the court case and were hopeful that the matter could be resolved.
Shares in eBay closed at $21.68, down 46 cents, or about 2 per cent, on Nasdaq after the announcement. The company’s shares have advanced from slightly less than $17 in July.