Contact: Mark Fontecchio
PayPal agrees to pay $1.1bn in cash for Xoom, an online money-transfer company with a large international and mobile presence. Xoom allows people to move money internationally, often done through mobile devices, while taking a service fee for each transaction. The deal allows PayPal stronger entry into the money-transfer market on the eve of its split with parent company eBay.
The $1.1bn deal value equates to $25 per share, about a 30% premium to what Xoom was trading for a month ago. Xoom’s revenue grew 30% to $160m in 2014, but it reported an operating income loss because of a one-time $31m charge due to criminal fraud targeting the company’s finance department. The incident led to Xoom’s CFO resigning. J.P. Morgan Securities advised PayPal on the transaction, while Qatalyst Partners advised Xoom.
PayPal is expected to spin off from eBay on July 17, about 13 years after it came under the auction site’s ownership. In that time, PayPal’s business has grown dramatically – for example, its $1.8bn in EBITDA last year was 10x its revenue when eBay bought it. The payments provider has made 10 acquisitions in that time, according to 451 Research’s M&A KnowledgeBase, with totals pending of $2.2bn. More than half of that amount has come just this year, as PayPal has readied itself for separation from eBay. Xoom is its biggest deal ever, while the $285m purchase of Paydiant in March signaled PayPal’s strong desire to get into the mobile payments business.