After several weeks of back and forth jabs, eBay (NASDAQ: EBAY) and activist investor Carl Icahn have agreed to end their battle and reach a compromise.

Icahn has agreed to end his proxy fight that could have turned eBay's upcoming shareholder meeting into a referendum on the Icahn's wishes for eBay to spin off PayPal.

Icahn will now withdraw his activist crusade to get eBay to split off PayPal and to add two of his nominees to eBay's board. In exchange, eBay will add David Dorman to the company's board as an independent at the suggestion of Icahn.

Dorman is a founding partner of Centerview Capital Technology whose resume includes a stint as the Chief Executive Officer of AT&T and lead independent director of Motorola Solutions. Dorman is also current a chairman at CVS Caremark and Yum Brands

Icahn isn't backing away from his demands that eBay split PayPal, but will now do so through confidential discussions with the company as the legendary billionaire investor signed a confidentiality agreement to open a more civil and constructive line of communication with eBay's management.

Carl Icahn took to social media to declare that eBay's move is a “win-win” for all.

eBay's CEO John Donahoe also played his part in mending fences and putting the past in the past.

“As a result of our conversations, it became clear that Carl and I strongly agree on the potential of PayPal and our company,” Donahoe said. “I respect Carl's willingness to work together to drive sustainable shareholder value today and into the future. His record shows that he has done this with many other companies in the past.”

Analyst reaction

Analysts as a whole have a bullish bias on eBay which has 32 Buy ratings, 14 Hold ratings and zero sell ratings with an average price target of $63.

Justin Post of Bank of America believes that the agreement between eBay and Icahn will “re-focus” investors on fundamentals.

Carlos Kirjner of Bernstein noted that the appointment of David Dorman to eBay's board will not fundamentally change the direction of eBay. Kirjner is also “slightly surprised” that the company hasn't committed yet to a large buyback.

Sanja Saakhrani of Keefe, Bruyette & Woods continues to believe that having a combined entity of PayPal and eBay makes strategic sense.

“We continue to believe that having the combined entities makes sense for EBAY particularly if one believes in the view that the lines of offline and online commerce continue to blur and having access to transactional data (via PayPal) and consumer level data (via both eBay and PayPal) can be leveraged to provide merchants with superior marketing capabilities,” Saakharani wrote in a brief note to clients.

Shares of eBay were trading lower by more than 2.50 percent Thursday afternoon, the largest daily decline since Icahn's original proposal to split PayPal on January 6.

It is important to note however that eBay's decline comes at a time of heavy market selling. The Nasdaq Composite Index was also trading lower by 2.50 percent Thursday afternoon.

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