EBay Settles Board Fight With Icahn

It began as the biggest hedge fund fight of the year, but is ending with a quiet truce.

EBay announced on Thursday that it had reached a settlement with the billionaire Carl C. Icahn, putting an end to an often bitter feud between the two sides.

Under the terms of their deal, Mr. Icahn will withdraw his bid for two seats on the e-commerce giant’s board and end his demand that the company sell a minority stake in its PayPal unit to shareholders. In return, eBay will add as a new director â€" David W. Dorman, the former chief executive of AT&T and a candidate both sides have agreed upon.

“As a result of our conversations, it became clear that Carl and I strongly agree on the potential of PayPal and our company,” John J. Donahoe, eBay’s chief executive, said in a statement. “I respect Carl’s willingness to work together to drive sustainable shareholder value today and into the future. His record shows that he has done this with many other companies in the past.”

The settlement concludes months of rancor between eBay and Mr. Icahn, the most prominent fight in a year when activist investors have taken on new levels of influence and power. Many companies have chosen to settle with these outspoken hedge funds, often quietly and well outside the public spotlight.

But the feud between Mr. Icahn and eBay has been very public. He has publicly criticized the online marketplace as having shortchanged investors by failing to get full value for the sale of businesses like the video chat service Skype.

In particular, he accused two board members, the venture capitalist Marc Andreessen and Intuit’s chairman, Scott Cook, of having conflicts of interest. And he criticized Mr. Donahoe of failing to act in shareholders’ best interests.

The presence of Mr. Andreessen on eBay’s board posed particular issues during the Skype sale, according to Mr. Icahn. The company, he argued, could have sold the service to a prospective bidder like Microsoft, but instead sold a majority stake to a group that included the venture capitalist’s investment firm for $2.75 billion.

Skype’s new owners then sold Skype to Microsoft for $8.5 billion, money that Mr. Icahn argued should have gone to eBay shareholders.

Apparently reveling in the freedom that online media provides, Mr. Icahn took to his Twitter account and his corporate blog to post multiple broadsides against the company.

Mr. Andreessen and eBay fought back just as hard, with Mr. Andreessen posting his own series of blog posts defending himself and criticizing Mr. Icahn’s reasoning. Mr. Andreessen noted in the posts that he had recused himself from all board discussions about the first Skype transaction.

Over time, Mr. Icahn changed his demands. Instead of calling on eBay to completely spin out PayPal, Mr. Icahn eventually argued that the company should sell 20 percent of the payment processor to its shareholders.

Shares of eBay were lower in pre-market trading on Thursday morning.