EBay Sells Back 28.4% Stake in Craigslist, Ending Litigation

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EBay Inc. sold its 28.4 percent stake in Craigslist Inc. back to the online classified advertising company, ending years of litigation between the technology pioneers as the Web marketplace prepares to restructure.

All litigation between the companies will be dismissed, EBay said in a statement Friday. The price of the stake in Craigslist, which is closely held, wasn’t disclosed.

The deal is the latest step by EBay to focus on its online marketplace. The San Jose, California-based company is scheduled to spin off its PayPal transactions business in the third quarter. The company also is trying to sell its EBay Enterprise division, which provides warehousing, delivery and customer support to online merchants.

“This is definitely a presplit house cleaning,” said Kerry Rice, an analyst at Needham & Co. “Eliminate peripheral businesses, focus on the core. I do not think Craigslist is important to EBay’s future. I think the Internet has passed Craigslist by.”

EBay’s 2004 purchase of the stake and the subsequent creation of its own online classified site, Kijiji, prompted Craigslist to mount takeover defenses and file lawsuits in California and Delaware. Kijiji was later renamed EbayClassifieds.com.

Craigslist said in the California suit that EBay used proprietary information obtained from the San Francisco-based company during negotiations over the stake purchase to start the competing business.

Insignificant Amount

EBay paid no more than $34 million for the investment, according to SEC filings. Johnna Hoff, a spokeswoman, declined to disclose terms of the latest sale, indicating that the company considered the amount insignificant to shareholders. EBay shares rose less than 1 percent to close at $61.17.

“This is part of the strategy of focusing on the core business, generating cash and returning some of it to shareholders,” said Gil Luria, an analyst at Wedbush Securities Inc.

Craigslist was founded in 1995 by Craig Newmark, a former International Business Machines Corp. computer programmer, as an e-mail list of San Francisco events. It is the No. 8 website by traffic in the U.S., just behind EBay, according to Amazon.com Inc.’s Alexa.com, a research service. Craigslist quoted Shakespeare’s “All’s Well That Ends Well” in blog post about the EBay settlement.

“Do wrong to none: be able for thine enemy / Rather in power than use,” the post said.

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