EBay sells Craigslist stake before PayPal split

The deal is the latest step by firm to focus on its online marketplace

EBay sold its 28.4 per cent stake in Craigslist 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 is also 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 defences 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. 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.