By Phil Wahba
NEW YORK (Reuters) - Activist investor Carl Icahn has dropped his call for EBAY (EBAY.NQ)Inc to split off its fast-growing PayPal payments unit but has suggested he would keep pressure on the e-commerce company.
EBay said on Thursday that it had settled its proxy fight with the billionaire, who also withdrew his two nominees for the eBay board ahead of the company's annual shareholder meeting next month.
In a concession to Icahn, eBay said it would add David Dorman, a founding partner of investment firm Centerview Capital Technology, as an independent director on its board.
But Icahn, who in January called for hiving off PayPal before engaging in weeks-long war of words with eBay, indicated he had not given up on the idea.
"I continue to believe that eBay would benefit from the separation of PayPal at some point in the near future," Icahn said in a statement. He said Donahoe had agreed to meet regularly to discuss strategic alternatives for PayPal.
EBay shares were down 2.7 percent at $54.37 in midday trading.
PayPal was founded in the late 1990s and went public in 2002. EBay acquired it soon afterward for $1.5 billion.
PayPal is now eBay's fastest growing business, with 143 million active users at the end of 2013, up 16 percent from a year earlier. PayPal's revenue rose 19 percent during the holiday quarter, beating a 12 percent rise at the marketplaces unit.
In the weeks after eBay disclosed Icahn's proposal, the investor wrote a number of open letters to fellow shareholders questioning Donahoe's abilities and calling corporate governance at the company among the worst he had ever seen.
In a research note earlier this week, Cantor Fitzgerald said shareholder pressure for a PayPal spinoff could increase if the company does not at least meet its lowered 2015 forecasts.
Donahoe and board members, including founder Pierre Omidyar, have repeatedly said eBay had been funding PayPal's growth, and the two were better off together.
In mid-March, Icahn appeared to backtrack, calling on eBay to sell 20 percent of PayPal in an initial public offering, rather than do a full spinoff.
Donahoe, who has been CEO since 2008, expressed relief that a potentially bruising and distracting proxy fight had ended.
"This proxy fight was not something that was helping eBay shareholders, or helping us innovate and execute more effectively," he told CNBC.
Dorman is a former CEO of AT&T Inc and current chairman of drugstore operator CVS Caremark Corp.
(Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn)
