PayPal Nears $2.2 Billion Deal for European Fintech Startup iZettle -- 2nd Update
18 Maggio 2018 - 12:49AM
Dow Jones News
By Ben Dummett and Peter Rudegeair
PayPal Holdings Inc. said Thursday it agreed to buy European
financial-technology startup iZettle AB for around $2.2 billion, a
move that will catapult the U.S. digital-payments giant into
hundreds of thousands of brick-and-mortar retailers around the
world.
The acquisition, the largest in PayPal's history, sets up a
showdown between the San Jose, Calif., company and Jack Dorsey's
Square Inc., which has built a big payments business catering to
coffee shops, flea-market vendors and millions of other small
businesses with physical locations that PayPal historically
overlooked.
iZettle, Stockholm-based company that has been called the
"Square of Europe," builds devices and technology that nearly
500,000 businesses in around a dozen European countries, Mexico and
Brazil use to accept credit cards. Most of those countries are ones
where PayPal has a small presence already, and it plans to roll out
iZettle devices in some of its biggest markets, including the
U.S.
PayPal's goal is to give a more comprehensive offering to
retailers that want to sell products in stores and across digital
platforms, Chief Executive Dan Schulman said in an interview, at a
time when competition from Amazon.com Inc. and traditional
retailers is fierce.
"Helping small businesses compete with the giants in the market
really resonated for both of us," Mr. Schulman said. He added that
combining PayPal's services with iZettle's will allow the company
to offer a "full-service, one-stop-shop solution" to current and
prospective customers.
The deal will also help PayPal offset the loss of one of its
sources of largest customers: eBay Inc., the online marketplace
that owned the payments firm until it was spun out as a separate
company in 2015. PayPal shares fell more than 12% earlier this year
when eBay, which had accounted for around one-fifth of PayPal's
2017 revenue, said it would start managing the payments flow of
buyers and sellers transacting on its website.
The shares have recovered much of that drop, and after they
soared last year, PayPal has a market value of more than $90
billion.
Meanwhile, Square has been moving into PayPal's turf. Square
Cash, a smartphone app that lets people send money and buy things
online, has amassed more than seven million users. Last month,
Square agreed to buy website-builder Weebly Inc. for around $365
million in a deal that would give it a bigger footprint in
e-commerce. Square also counts former PayPal finance chief Roelof
Botha as a board member.
PayPal, which is around twice as old as Square, still has a big
size advantage. It processed $132 billion in total payment volume
in the first quarter of 2018, or more than seven times Square's
$17.8 billion of volume in the same period. iZettle, which had been
preparing an initial public offering, expects its 2018 payments
volume to be roughly $6 billion.
The rapid growth of cross-border commerce and the blurring of
the lines between online and offline sales has led to a frenzy of
deal making in the payments industry. Last year Vantiv Inc. agreed
to acquire U.K. payments processor Worldpay Group PLC for $10.4
billion, while two private-equity firms agreed to buy U.K.
online-payments processor Paysafe Group PLC for $3.89 billion.
PayPal and eBay have had a mixed record when it comes to
payments deals. The 2013 acquisition of Braintree Payments
Solutions LLC for $800 million turbocharged PayPal's
mobile-payments acceptance tools and brought it popular digital
money-transfer service Venmo.
But last year's $238 million deal to buy bill-payments company
TIO Networks became a "black eye" for PayPal, its finance chief,
John Rainey, said at an investor conference this week. The company
decided to wind down TIO after discovering a data breach in TIO's
systems that potentially compromised the personal information of up
to 1.6 million users. TIO's systems were never integrated to
PayPal's.
iZettle Chief Executive Jacob de Geer will continue to lead that
business and report to Bill Ready, PayPal's chief operating
officer. Mr. Ready joined PayPal as part of its Braintree
acquisition.
Mr. de Geer said in an interview that he decided to sell to
PayPal rather than pursue an IPO after "realizing that combining
forces was effectively giving my company superpowers." The price is
a lofty one at roughly 13 times iZettle's projected 2018 revenue of
$165 million.
Evercore advised PayPal on the transaction while JPMorgan Chase
& Co. advised iZettle.
Write to Ben Dummett at ben.dummett@wsj.com and Peter Rudegeair
at Peter.Rudegeair@wsj.com
(END) Dow Jones Newswires
May 17, 2018 18:34 ET (22:34 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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