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UPDATE 2-Skype suitors reach legal pact, eBay deal to proceed

* Investor group settles with Skype founders

* Index Ventures no longer included in deal

* eBay to get $1.9 bln cash, $125 mln note

* Deal values Skype at $2.75 billion

(Adds details of deal, investor quote)

NEW YORK, Nov 6 (Reuters) - EBay Inc EBAY.O said on Friday that private investors looking to buy Skype had agreed to settle litigation with Skype's founders, who will get a 14-percent stake in the Internet phone service in the transaction.

EBay, which is selling Skype in order to focus on its core online auction and payments business, said the group led by Silver Lake reached a settlement with Joltid and Joost, the companies of Skype founders Niklas Zennstrom and Janus Friis.

Under the agreement, Silver Lake and 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.

The buyers will no longer include Index Ventures. The Skype founders had filed a lawsuit accusing Index and its partner Michelangelo Volpi of using confidential information in their bid to acquire a 65 percent stake in Skype.

Under the deal, eBay will get approximately $1.9 billion in cash and a note from the buyer worth $125 million. 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, eBay said.

Zennstrom and Friis will contribute Joltid software and make a significant capital investment in exchange for their stake in the company.

The agreement gives Skype ownership over all software previously licensed from Joltid and ends all litigation pending against the investor group and eBay at the closing of the acquisition.

Andreessen Horowitz founder Marc Andreessen, who also founded Netscape Communications, said he sees better growth prospects for Skype as a private company, including more flexibility to make strategic investments.

“We have very ambitious goals in terms of products and product strategies,” Andreessen said, citing mobile as one area for growth.

The technology entrepreneur said that his firm Andreessen Horowitz would continue to work with Index Ventures on different deals and said that the firms were currently in talks about two other technology investment opportunities. He declined to be more specific. (Reporting by Sinead Carew; Editing by Derek Caney)

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