Goldman Sachs Group Inc. (GS:US) is working for EBay Inc. (EBAY:US) as it faces calls from Carl Icahn to split off its PayPal unit, people with knowledge of the matter said, the investment bank’s latest assignment with a technology company facing an activist investor.
Goldman Sachs is a long-time adviser to EBay on a number of issues, Amanda Miller, spokeswoman for the online marketplace, said while declining to discuss the specifics of the bank’s current role regarding Icahn’s efforts. “We did not engage them specifically for this matter,” she said.
The New York-based bank also has advised Apple (AAPL:US) Inc. and Microsoft Corp. (MSFT:US), the people said, asking not to be identified discussing private information. Apple faces calls for a bigger stock buyback from Icahn, and Microsoft recently said it will allow ValueAct Capital Management LLC President Mason Morfit to join its board.
Investment banks are building up practices that advise companies on how to deter and respond to activists, as the investors garner more money and institutional backing. Funds managed by activists have almost tripled over five years, to $93 billion at the end of last year from about $32 billion in 2008, according to data compiled by Hedge Fund Research.
At Goldman Sachs, the activist defense practice has been spearheaded by partner Bill Anderson, who joined the bank in 2000. Anderson was previously an M&A lawyer at Simpson Thacher & Bartlett LLP.
Icahn informed EBay last week he had begun purchasing the online marketplace’s shares and was nominating two directors to its board, the company said. Icahn called a separation of PayPal -- one of EBay’s faster-growing businesses -- from the company a “no-brainer” in an interview on Bloomberg TV.
Tony Imperati, a spokesman for Microsoft, declined to comment, as did Andrew Williams, a spokesman for Goldman Sachs.
Lately, companies have been more proactively engaging activists before their efforts become public. Icahn’s demands for for the PayPal split were disclosed by the San Jose, California-based company in its quarterly earnings report.
EBay Chief Executive Officer John Donahoe spoke with Icahn last week and said on a conference call the company should stay together, citing how the intertwined entity helps fund PayPal’s expansion into areas such as mobile. The payments unit boosted sales 19 percent last quarter, outpacing 12 percent sales growth at EBay’s marketplace unit, which faces stiff competition from Amazon.com Inc. (AMZN:US)
Icahn’s EBay investment follows a string of actions by activists taking on Silicon Valley technology firms, especially as some of the companies’ rapid growth rates slow. Icahn has this week tweeted that he increased his stake in Apple.
He is proposing that the company commit to buying back at least $50 billion worth of shares in fiscal 2014, something that Apple is recomending investors vote against. Goldman Sachs advised Apple’s board as it weighed an earlier push from Greenlight Capital Inc.’s David Einhorn to issue more preferred stock which would pay a higher dividend than common stock.
Microsoft signed a pact to cooperate with ValueAct in August, four months after the activist fund disclosed a stake of about $1.9 billion in the software maker and at the deadline for proxy contests ahead of a November annual meeting. ValueAct, the San Francisco-based firm headed by Jeffrey Ubben, has since increased (MSFT:US) its stake.
As part of the agreement, Microsoft said it would allow Morfit to join the board and hold regular meetings with Morfit, directors and select management.
Technology companies Hewlett-Packard Co., Juniper Networks Inc. and Riverbed Technology Inc. are also facing activist pressure.
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