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Skype founders win 14% stake for patents
06 November 2009
Niklas Zennström and Janus Friis have won a victory in their legal battle against Skype owner eBay and will take a 14% stake worth $385 million in the IP telephony company in full settlement
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Skype
eBay
Zennström
Friis
Andreessen
Silver Lake
Comment: In football terms this result would be expressed: eBay nil, Zennström and Friis six. Skype was always a curious purchase for eBay back in 2005 and few understood the logic. When eBay agreed to sell 56% of Skype to private equity investors earlier in 2009 Zennström and Friis suddenly revealed — much to eBay’s surprise — that Skype did not own the intellectual property. The cost to eBay of that mistake is $385 million
Skype founders Niklas Zennström and Janus Friis have won 14% of the company they set up in exchange for the intellectual property used by the IP phone system. The deal means that eBay has been able to go ahead with its sale of a majority stake in Skype to a group of private equity investors led by Silver Lake.
Zennström and Friis have withdrawn their legal action against eBay, which was threatening to hold up its sale of a 56% stake in Skype. Silver Lake and other investors — including Marc Andreessen, the founder of Netscape — had agreed to pay $1.9 billion in cash for the Skype stake.
eBay will still receive the same cash for the 56%, but will hand over 14% to Zennström and Friis in settlement of the action, reducing its own stake to 30%. eBay bought Skype from Zennström and Friis and their venture capital investors in 2005 for $3.1 billion.
That means eBay has lost the equivalent of $385 million — 14% of a company valued at $2.75 billion — because its previous management did not buy the intellectual property associated with the Skype service.
Zennström and Friis put that into a separate company, Joltid, which eBay did not purchase. Joltid, along with Zennström and Friis, will hold the 14% and Skype will now own all the intellectual property in exchange for the shares.
The revived sale is expected to close quickly, before the end of 2009, says eBay. The agreement “ends all litigation currently pending against the investor group and eBay at the closing of the acquisition”, said eBay.
eBay CEO John Donahoe said: “Skype will be well positioned to move forward under new owners with ownership and control over its core technology. At the same time, eBay continues to retain a significant stake in Skype and will benefit from its continued growth. We look forward to closing the deal and focusing on growing our core ecommerce and payments businesses.”
One member of the purchase team, Index Ventures, decided to pull out of the deal. Danny Rimer of Index Ventures, said: “Although Skype has the potential to be a great investment, the deal terms changed for Index such that it no longer matches our investment criteria and thus we have decided not to participate in the transaction.” GTB