- EBAY closed up 2.4% following news PayPal (NASDAQ:PYPL) is buying top online international money transfer service XOOM for $890M. With PayPal now just 18 days away from trading separately, eBay is within $1.50 of a 52-week high of $63.30. Western Union had a less favorable reaction to the deal.
- Street reactions to the purchase have been largely positive. SunTrust's Bob Peck: "We see synergies/opportunity between Xoom and [mobile payments platform] Venmo inside the PayPal ecosystem enabling lower cost (ACH, or debit worse-case) wallet funding (PayPal, Paydiant) and in-market and cross-border [consumer-to-consumer] and [consumer-to-business] transactions. This could serve to sustain relevance on the consumer side and (interrelated) preserve/lower funding cost and strengthen the value proposition on the merchant side."
- Baird's Colin Sebastian: "Both PayPal and Xoom have competitive advantages from fraud-detection technology underlying their respective products. While Xoom’s engine was initially built using concepts borrowed from PayPal, they have since extended the functionality to peer-to-peer international remittance..."
- Keefe, Bruyette & Woods' Sanjay Sakhrani: "[I]nternational money transmittance is a highly adjacent business to P2P payments and digital wallets, which is PayPal's core business…Despite a fairly rich valuation, XOOM is growing quickly and brings to the table a scalable, bolt-on platform to help offer additional value-add..." Morgan Stanley's Brian Nowak sees an opportunity to significantly expand Xoom's op. margin (4% in 2014).
- Xoom closed at $25.05, slightly above PayPal's $25/share buyout price. SunTrust's Andrew Jeffrey thinks Western Union and/or Internet companies could make a rival bid. Baird's Sebastian: "Higher bid from traditional money transfer company still plausible given a PayPal-Xoom combination presents a much greater (and better-capitalized) competitive threat."