Ebay shares jumped 11 per cent in pre-market trading as it confirmed plans to spin off its online payment company Paypal into a separately listed company sometime in the second half of next year.
The auction site said following a strategic review, its board had decided separating the two companies will position them "to capitalise on their respective growth opportunities in the rapidly changing global commerce and payments landscape", creating sustainable value for shareholders.
Devin Wenig, currently president of Ebay's Marketplaces arm, will become chief executive of the new, slimmed-down Ebay, while Dan Schulman, currently group president of enterprise growth at American Express, will lead the spun-off Paypal.
The company said keeping Ebay and Paypal together after 2015 "clearly becomes less advantageous to each business strategically and competitively".
The industry landscape is changing, and each business faces different competitive opportunities and challenges.
John Donahoe, Ebay's president and chief executive, added that the two will "enjoy added flexibility to pursue new market and partnership opportunities".
We are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward. Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders.
The move is a change of attitude for Donahoe, who has previously resisted calls from activist investor Carl Icahn to separate the two companies.
But the company has experienced a difficult few months. In May, it was revealed hackers had gained access to one of its databases containing encrypted passwords, forcing 145 million users to change their passwords.
In July it posted revenues up 13 per cent to $4.4bn, below expectations. The company said it had been a "challenging quarter".