We now have confirmation of the sale of Skype, a story we broke last week and was yesterday proclaimed a done deal by NY Times reporters.
The acquiring party is indeed an investor group led by private equity firm Silver Lake Partners, who likely paid the bulk of the amount Skype was sold for.
Other investors include VC firms Andreessen Horowitz and Index Ventures (a previous investor in Skype), as well as the Canada Pension Plan (CPP) Investment Board.
The new investors will buy approximately 65% of Skype, with eBay continuing to own 35%, in a deal valuing Skype at $2.75 billion US. 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 transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009.
Worth noting: Andreessen Horowitz partner Marc Andreessen sits on the eBay Board of Directors.
Ebay had reportedly been looking to sell Skype for $2 billion, compared to the $3.1 billion it put on the table to buy out the company and pay out its founders Niklas Zennstrom and Janus Friis back in 2005. Since then, eBay has written down nearly a billion dollars of the deal value after realizing the supposed synergies weren’t going to pan out as planned. Skype is said to be making approximately $600 million a year in revenues, so it seems like the investor group acquired the company at a very reasonable price.
Earlier this year, eBay had announced that they would be spinning off the company in an IPO in 2010. As Michael noted when he broke the news about the impending deal that was confirmed today, these announcements are often made to generate acquisition offers from potential suitors. If Skype will ultimately be floated on the stock market in the near future remains to be seen.
Full release is below, and bares no mention about the litigation currently at hand between eBay and its initials founders over key Skype technology.
Full press release:
eBay Inc. (NASDAQ:EBAY) today announced it 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 percent 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 percent equity investment in Skype. The transaction, which is not subject to a financing condition, is expected to close in the fourth quarter of 2009.
“This is a great deal, unlocking both immediate and long-term value for eBay and tremendous potential for Skype,” said eBay Inc. President and CEO John Donahoe. “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.”
Commenting on the deal, Egon Durban, managing director at Silver Lake, said: “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. Josh Silverman has done a strong job leading the company and we look forward to working with Josh and his team to grow the Skype franchise.”
In April 2009, eBay announced plans to separate Skype from the company, beginning with an IPO in 2010. The decision followed a year-long review of Skype within eBay’s portfolio. As it prepared for an IPO, the company said it would naturally consider bids for Skype that offered an attractive valuation. Donahoe said the deal offered by the investor group achieved that.
“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,” Donahoe said. “Selling Skype now at this great valuation, while retaining an equity stake, makes sense for the company. And it allows us to focus all of our energies on the opportunities in front of PayPal and eBay.”
Acquired by eBay in 2005, Skype has strengthened considerably since early 2008 when Donahoe was named eBay’s CEO and tapped company executive Josh Silverman to lead Skype. Silverman has driven strong momentum while building a new management team and delivering a series of Skype innovations such as software upgrades with dramatically improved video and calling quality, the widely popular Skype iPhone app and mobile partnerships with companies such as Nokia and Hutchison. In 2008, Skype generated revenues of $551 million, a 44 percent increase compared to 2007. Total eBay Inc. revenues for 2008 were $8.5 billion. Registered Skype users reached 405 million by the end of 2008, a 47 percent increase from 2007. Skype is attracting hundreds of thousands of new users each week.
(Image via E24)
Thank you for the post.
TechCrunch is the best resource for technology news. Keep up the great work!
By the way, I think you guys should have a caption contest every week. It would be fun!
Seems like a good deal for Ebay.
Is this good or bad for Skype? I love Skype, and would hate to see it go down in quality.
http://traderbo...spx?symbol=ebay
A original investors in Skype, I’d suggest that a free Skype is good for both. eBay’s current business offers few synergies, and a big multinational needs to accommodate business partners —which limits Skype’s ability to pursue growth aggressively. For example, Skype for wifi-enabled cell phones has been delayed by pressure from wireless carriers who see their voice revenue at risk.
A free Skype could also challenge international carriers (e.g., in Mexico) who got Cisco to introduce noise onto Skype traffic. Disabling Skype would be too obvious, so they degrade the signal.
Blog on this:
http://www.flic...tson/3447358053
The benefits of Skype are such that it is impossible to restrain its growth (it is the largest provider of cross border voice communications now). Even for businesses, especially small businesses like ours, the ability to have free international voice communications is indespensible. We use Skype extensively at HyperOffice for international sales, team collaboration amongst teams scattered across USA, South America and Asia, and encourage customers to use our product in tandem with Skype (we told Skype this story and won their “Skype for Business award“).
Why do you keep mentioned “we broke” in all the freaking articles? Do you think anyone cares? It’s fking pathetic.
If they broke it, they should fix it.
Breaking a story is like street cred in the journalism world.
Think Xbox Gamer Points for bloggers. TechCrunch wants you to remember them as the tech news powerhouse.
http://www.traderbots.com
These news are leaked..
There is no “street cred” for Techcrunch.
Kinda overestimated here.
ESPN does the same thing.
Conflicting data between the headline and the article:
Headline: “eBay Sells Skype In Deal Valued At $2.75 Billion”
Article: “…in a deal valuing Skype at $2.75 billion ”
If I’m not mistaken, the DEAL is for around $2B (so the headline is wrong), and Skype is valued at $2.75B. The deal was for only 65%.
Right?
Yes, was a bit confusing, this headline should be better. thanks for the heads up.
I won’t buy Skype !
Skype does not have any future: all telcos are now offering cheap ToIP (telephony over IP) services right from their ADSL:cable boxes !
So Skype revenues can’t grow anymore, and Skype has to pay fees to incumbent telcos who terminate the calls on their regular phone lines…
I said from the very beginnig that this acquisition was a total mistake from Ebay… and a mess for Ebay shareholders!
Hope it works out for Skype too… Its probably one of the most loved softwares out there
Why French never buy those types of companies?!
Stupid question from a French man, of course…
I wonder what the PayPal fees were on that transaction.
Paypal fees were probably 2.9% + $0.30 USD AND Paypal forced them to add a bank account.
Maybe now, the new owners can focus on ALL aspects of Skype and redesign and relaunch the much used and liked SKYPECASTS…….
This is great news for all involved, including the consumers. With the revenues Skype is generating, it does not need the “cash cushion” of a giant company in exchange for its independence.
Now, it can independently continue innovating and revolutionizing the communications industry. As we have all seen, there has not been much innovation coming out of Skype for the past 4 years. The landscape is about to change and all VoIP startups need to take serious note of this.
wtf??? why is canada pension plan investing in this? Should I be worried about what the canadian government is doing with my pension money????
Joe, first of all, if you think there is going to be a Canadian Pension for you and millions of others when they retire – forget it. Plan of working until you die.
Here’s more info via TechVibes:
So what exactly is the CPPIB? And why did they invest in Skype?
Under the direction of then Finance Minister Paul Martin, the CPPIB was created in 1997 as an organization independent of the government to monitor and invest the funds held by the CPP. The CPPIB is a crown corporation created by an Act of Parliament. It reports quarterly on its performance, has a professional management team to oversee the operation of various aspects of the CPP reserve fund and also to plan changes in direction, and a board of directors that is accountable to but independent from the federal government.
David Denison is the current CEO of the CPPIB. According to their June 2009 Quarterly Report, about 43% of the fund’s assets are invested in securities domiciled outside Canada. This is up from 38% the previous year as Denison is actively trying to increase the fund’s foreign investment. In recent years, the CPPIB has also changed direction in its investment philosophy. It evolved from investing exclusively in non-marketable government bonds to passive index-fund strategies and, more recently, to active investment strategies.
An investment in Skype certainly falls under the active investment strategy category.
Congrats to the folks at Skype and ebay for making this happen. I think the deal was worth about $2b.
So, if the investors get 65% of the equity and Ebay keeps 35%, then the employees have 0%? If a typical 20% option pool is allocated, this deal is materially different depending on where that equity comes from. Any insight?
Good point. I am also curious about pool for option grants to Skype emp and eBay emp.
Anyone knows?
Congratulations on behalf of the Myngle team to Josh and the new (co-)owners.
Egbert
Congrats, great deal at that revenue growth!
Next step, twitter -SKYPE Merger
Fantastic.
If you love somebody…. set them free
http://www.flic...son/3447358053/
I can see why they should be upset, aren’t they new loosing sales or clients over this???
Skype was sold? Who knew?!?!?!? Cool.
One of the largest wastes of shareholder money in a long time.
All of the US media seem to be ignoring the fact that there was another partner in the purchase – The Canadian Pension Plan Investment Board (CPPIB). Now THAT is a truly scary proposition when my pension contributions are funding active investments . . .
Congrats Skype, excited to see new things from Skype.
Congrats to Skype. Hopefully this leads to some exciting new developments
Seems like a good deal for Ebay. Is this good or bad for Skype? I love Skype, and would hate to see it go down in quality.
I never understood how DFJ (Steve Jurvetson) was able to persuade Ebay to acquire Skype.
It was clear for me from the seminal stage that it will be a failed acquisition – there was not even a modicum strategic fit between Skye and Ebay at the time of purchase.
Look out how Steve is avertly mocking Ebay on TC.
So what will #Skype do about all the fraud it is suffering? I lost £2 in fraudulent calls charged to my account. A friend had his automatic top up on and lost a total of £30 in wrongly billed calls – #SKYPE say it our problem and refuse to give a rebate.
Have you been riiped off?
Purchasing Skype was another example of Meg Whitman trying to nudge Ebay customers into being something they don’t want to be. A majority of Ebay sellers are individuals who for various reasons choose not to operate traditional retail operations. Stay at home moms, retirees, the unemployed, part timers, moonlighters, one-man companies, the handicapped, etc. One chatty customer can consume all the profit from a sale. When you’re wearing ALL the hats, your time is a precious commodity that must be carefully managed.
Only egomaniacs like Whitman and Donahoe would think they can force a new business model on their customers.
I really hope this sale will mean a new direction for Skype. The past couple of years have not been the best. Since the founders sold the service has slowly, but surely degraded.
The service has gotten so bad that customers are no longer provided with a means to cancel a subscription. Skype has removed all options for you to cancel your subscriptions. Funny how they haven’t stopped you from signing up for the service! See, http://biturl.cc/xr4 – skype forum post on the issue for more details.
What this means is the customer will be billed repeatedly by skype with no means to cancel the subscription. The only means to cancel, allegedly, is to put in a support ticket – lets see how long a manual cancel takes. This issue has been active since, at least, February 2009. If I had known about it I would never have renewed my subscription.
This is truly a SHAME! I’m praying to god the original founders step back in and make Skype great again. Cause if customer service doesn’t remove the auto rebill on my account, I guarantee I will become a CHARGEBACK RAMBO!