The news that PayPal was going to acquire international money transfer provider, Xoom, for $890 million in an all-cash deal came in early July.
Just three business days later, the deal hit a potential shareholder snag when there was a debate about the price of the shares, after former U.S. Securities and Exchange Commission attorney Willie Briscoe, along with a securities litigation firm, Powers Taylor LLP, said they were investigating potential claims against Xoom’s board of directors.
Now, months later, the details have been worked out and PayPal and Xoom have officially announced the completion of the deal that has PayPal acquiring the outstanding shares of Xoom for $25/share in all cash. That was the terms of the deal initially discussed, but there was discussion about if Xoom’s value was closer to one analyst’s valuation of $32/share.
Now that the deal is official, Xoom will operate as a separate service under PayPal’s umbrella under CEO John Kunze’s leadership, who has joined PayPal’s executive staff and will report to PayPal CEO Dan Schulman.
With Xoom, PayPal has access to 1.5 million active U.S. customers. Xoom’s last quarter results showed those customers sent $7.1 billion to people in 40 countries. Xoom also has a strong mobile user base, with 60 percent of its active users on mobile. Additionally, 97 percent of its payment volume comes from repeat users.
“Becoming part of PayPal represents an exciting new chapter for Xoom, which will help accelerate our time-to-market in unserved geographies and expand the ways we can innovate for customers,” Kunze said in July. “Being part of a larger, global organization will help us deliver the best possible experience to our customers, while maximizing value for our shareholders.”
Xoom’s “anytime, anywhere” money transfer platform enables U.S. consumers to send money to friends and family in 37 different “receive” countries and pay bills via mobile phones, tablets and computers. Xoom’s proprietary “funds-out” network will allow PayPal to build out a key part of its consumer value proposition: digital money transfer and management. PayPal currently has 68 million active users in the U.S.
Schulman remarked that “expanding into international money transfer and remittances aligns with our strategic vision to democratize the movement and management of money. Acquiring Xoom allows PayPal to offer a broader range of services to our global customer base, increase customer engagement and enter an important and growing adjacent marketplace.”
Cross-selling Xoom’s capabilities will expand the set of offerings that PayPal’s existing user base in the U.S. can leverage, not to mention fast track its ability to enable global money transfer in attractive “receive” markets such as Mexico, India, the Philippines, China and Brazil. The acquisition could also help both companies create the scale and integrated product set that supports the development of new business models for how money is moved digitally between consumers, businesses and merchants.
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