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EBay founder defends company plan to retain PayPal against advice of investor Carl Icahn

NEW YORK, N.Y. - EBay's founder Pierre Omidyar on Thursday said billionaire investor Carl Icahn's claims that the company is not operating in the best manner for shareholders aren't merited.

In three letters to shareholders over three days, Icahn has urged the company to split off its PayPal unit, which is the fastest growing unit of the e-commerce company and accounts for about 40 per cent of its revenue. Icahn has also levelled attacks at two directors and company CEO John Donahoe. In his latest letter, Icahn said responses to his letters from "eBay's public relations machines" aren't sticking to the facts.

On Thursday, founder and chairman Omidyar said Icahn is making unsubstantiated claims about the company and "deliberately impugning the integrity of our directors." He said the idea of splitting off PayPal is not a new one and that eBay has considered it and decided against it in the past.

"After diligent consideration, we believe that PayPal and eBay are better together," Omidyar said. "In the future, if we determine that's no longer true, we will act accordingly and in the best interests of shareholders and the company."

EBay bought PayPal for $1.3 billion in late 2002. Recently, PayPal has been expanding into brick-and-mortar stores from serving solely as an online payments service.

In January, EBay said Icahn had taken a less than 1 per cent stake in the company and said he was seeking a non-binding shareholder resolution to spin off PayPal. At the time Icahn also nominated two of his employees for eBay's board. EBay said then that it had looked into a split from PayPal, but felt it wasn't the best move for shareholders. But it said it will review Icahn's nominees.

Shares of eBay rose $1.11, or nearly 2 per cent, to $58.45 in midday trading. The stock has risen about 6 per cent since the beginning of the year.

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