EBay Inc plans to sell a 65 percent stake in its online phone unit Skype for $1.9 billion to private investors including Silver Lake and a venture firm run by the Netscape co-founder Marc Andreessen.
The deal values Skype at $2.75 billion, down from the $3.1 billion the Internet auction house paid for the popular service in 2005.
The group buying Skype includes London-based Index Ventures and the Canada Pension Plan, in addition to Silver Lake and Andreessen's firm Andreessen Horowitz.
The deal leaves to eBay focus on its PayPal electronic payments service as well as its flagship auction service, the company said. It also avoids the risks of a initial public offering eBay had slated for Skype next year.
Susquehanna Financial Group analyst Marianne Wolk said the valuation was at the high end of her expectations.
"It eliminates the risk of the planned IPO and is a better price than many of us expected," Wolk said, adding that the valuation is about 24 times her estimate for Skype's 2009 after-tax earnings contribution to eBay or 4 times her revenue estimate.
John Donahoe, eBay's chief executive, had said in May that a $2 billion valuation would be low for the growing Internet telephone business amid speculation about a potential sale of the company to private investors.
Skype revenue rose 44 percent to $551 million in 2008, according to eBay. Skype, which charges for calls to regular telephones but provides free computer-to-computer voice, video and text services, had about 405 million registered users at the end of 2008.
In 2007, eBay wrote down about $1.4 billion of its investment in Skype, conceding that it did not fit in with the rest of its online auction business. "Skype is a strong standalone business, but it does not have synergies with our e-commerce and online payments business," Donahoe said in a statement.
Susquehanna's Wolk said eBay's retention of a Skype stake was positive.
"They'll be able to participate in the longer term earnings growth of the company," she said adding: "You don't know if there's an incentive to IPO the remaining stake downstream."
EBay said the deal would close in the fourth quarter. The transaction is not subject to a financing condition.
Shares in eBay were down 14 cents to $22.00 on Nasdaq after the news. The company's shares have shot up from just under $17 in July.
(Reporting by Sinead Carew in New York and Ajay Kamalakaran in Bangalore, editing by Will Waterman and Derek Caney)