PayPal absorbs Xoom for $890 million
PayPal is absorbing San Francisco-based company Xoom, a developer of an online money transfer system and services that went public in 2013. PayPal will pay $25 for each share of the company, and the total value of the transaction will be $890 million in cash.
The transaction will take place at a premium of 21% relative to the current value of the shares of the company being absorbed.
In its press release, PayPal notes that the takeover of Xoom will allow it to offer users around the world a wider range of services, increase the number of attracted customers and enter an important and growing adjacent market. Xoom’s presence in 37 countries – in particular, in Mexico, India, the Philippines, China and Brazil – will help PayPal expand its influence in important markets.
Simply put, Xoom’s core business is focused on money transfers between friends and family members. PayPal transactions mostly make up commercial payments. Now PayPal, which already has more than 68 million. active users in the USA, will be able to attract more foreigners.
Before going public, the 14-year-old Xoom raised $78 million in external financing from a large pool of investors, including Glynn Capital Management, Sequoia Capital, New Enterprise Associates and Fidelity Ventures. Its founder and CEO Kevin Hartz later became a co-founder of the online ticket company Eventbrite, in which he remains CEO.
As a public company, Xoom found itself one-on-one with a serious shock when earlier this year it announced a fourth-quarter loss of $30.8 million caused by suspected employee dishonesty and possible fraud in its finance department. At the same time, the CFO resigned, although Xoom reported that his departure was caused by disagreements with the company’s management.
On the other hand, Xoom shares, which were trading at $34 in July 2013, did not feel such a negative impact from the incident. In January, the value of the securities dropped to $17 per share, and as of June 30, they were trading at $22.
Published: 7 November, 2015