eBay is giving up 5% of Skype (at a valuation of $135 million) to settle litigation with Skype founders. eBay announced that the investor group led by Silver Lake, which had previously entered into a definitive agreement to acquire a majority stake in Skype from the company, has reached a settlement agreement with Joltid Limited and Joost N.V. that gives Skype ownership over all software previously licensed from Joltid and ends all litigation currently pending against the investor group and eBay at the closing of the acquisition. The investor group will no longer include Index Ventures, which has withdrawn from participation.

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 - in other words, eBay is getting the same amount of money for 5 percent less ownership in Skype. The deal values Skype at $2.75 billion and is not subject to a financing condition; it is expected to close in the fourth quarter of 2009.