Skype and eBay Settle with Joltid

Skype and eBay announced they has reached a settlement agreement with Joltid and Joost N.V. that gives Skype ownership over all software previously licensed from Joltid.

It also ends all litigation currently pending against the investor group and eBay at the closing of the acquisition (the investor group led by Silver Lake had previously entered into a definitive agreement to acquire a majority stake in Skype from the company).

As part of the settlement agreement, Joltid and Skype founders Niklas Zennström and Janus Friis will join the investor group, contributing Joltid software and making a significant capital investment in exchange for a 14 percent stake in Skype.

As a result, Silver Lake and other investors including Andreessen Horowitz and the Canada Pension Plan Investment Board (CPPIB), will together hold 56 percent of Skype and eBay will retain 30 percent.

eBay will receive approximately $1.9 billion in cash upon the completion of the sale and a note from the buyer in the principal amount of $125 million.

The deal, which values Skype at $2.75 billion and is not subject to a financing condition, is expected to close in the fourth quarter of 2009.

“We will now have ownership of the software previously licensed from Joltid, so we’ll be in control of our technology future,” Josh Silverman, president of Skype, wrote at Skype’s blog.

“All litigation against eBay, Skype and the investor group ends, so we’ll be free to concentrate all of our efforts on building the world’s greatest communications software,” he added.

Commenting on the agreement on behalf of the investor group, Silver Lake Managing Director Egon Durban said: “We are very pleased to have the litigation resolved. We remain confident in a great future for Skype, and we look forward to working with Niklas, Janus and the other investors as partners to help the company achieve its full potential.”

The investor group will no longer include Index Ventures, which has withdrawn from participation. “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,” said Danny Rimer of Index Ventures.