by Anton Shilov
09/01/2009 | 11:48 AM
A little less than exactly four years after Ebay acquired Skype Technologies, it announced intention to get rid of the voice-over-Internet-protocol (VoIP) company. Financial performance of Skype not only allowed Ebay to return of its initial investment, but the operator, which is probably among the largest in the world, has never managed to become an integral part of Ebay.
“We've 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 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,” admitted John Donahoe, president and chief executive officer of Ebay.
Ebay has signed a definitive agreement to sell its Skype communications unit in a deal valuing the business at $2.75 billion. The buyer, who will control an approximately 65% stake, is an investor group led by Silver Lake and includes Index Ventures, Andreessen Horowitz and the Canada Pension Plan (CPP) Investment Board. Ebay is expected to receive approximately $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million.The company will retain an approximately 35% equity investment in Skype. The transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009.
Skype originally paid about $3.1 billion for Skype back in 2005 – 2006. However, the transaction is considered to be one of the biggest fiasco in the tech world. Skype has never become an actual part of Ebay and its revenues were not as high as expected initially. Potentially, Skype may become much more successful as a standalone company.
In 2008, Skype generated revenues of $551 million, a 44% increase compared to 2007. Total Ebay revenues for 2008 were $8.5 billion. Registered Skype users reached 405 million by the end of 2008, a 47% increase from 2007.
"Skype is an innovative, next-generation company that has changed how people and businesses communicate with each other. 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," said Egon Durban, managing director at Silver Lake.
In April 2009, Ebay announced plans to separate Skype from the company, beginning with an IPO in 2010. As it prepared for an IPO, the company said it would naturally consider bids for Skype that offered an attractive valuation. The head of Ebay said the deal offered by the investor group achieved that.