By Cody Miecnikowski
On July 2, eBay Inc (NASDAQ:EBAY) announced a clear-cut agreement in which Paypal, Inc. will acquire Xoom Corp (NASDAQ:XOOM) for $25 per share, or $890 million in cash. eBay’s shares have since increased, but some analysts argue that eBay’s shares will level off.
PayPal’s $890 million transaction represents a premium of 32% over Xoom’s three-month volume-weighted average price and was unanimously approved by the Board of Directors of both companies, as well as the Board of eBay Inc., PayPal’s parent company.
These companies have a niche presence in the digital money transfer market, and make a strong union together.
Launched in 2001, Xoom is known as a pioneer in digital money transfer, allowing consumers to send money and pay bills from the United States to 33 other countries. Founded in 1998, PayPal is a worldwide online payment system and has become one of the world’s largest Internet payment companies.
In July 2002 shortly after PayPal’s IPO, the company was acquired by eBay for $1.5 billion. After the companies merged, more than 70% of all eBay auctions accepted PayPal payments, and roughly 1 in 4 closed auction via PayPal.
It was announced in September 2014 that eBay would spin off PayPal into a separate publicly traded company. The spin-off is expected to be completed sometime in the second half of 2015.
PayPal’s president, Dan Schulman, said, “Expanding into international money transfer and remittances aligns with our strategic vision to democratize the movement and management of money.†He continues, “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.†He goes on to explain that Xoom’s presence in 37 countries will help PayPal’s expansion into important markets like Mexico, China, India, Brazil, and more.
