PayPal to Buy Money Transfer Company Xoom

The transaction, which values each Xoom share at $25, represents a premium of 32 per cent over Xoom’s three-month volume-weighted average price, Ebay Inc, PayPal’s parent company, said in a press statement. “PayPal will also help Xoom grow by offering Xoom’s services to our 68 million active USA customers”.

PayPal have announced that they intend to acquire worldwide money transfer company Xoom for $890 million. XOOM, based in San Francisco, will boost up PayPal’s effort to advance its expansion into the countries where XOOM already runs its operation, specifically the major markets of Mexico, Philippines, China, India and Brazil.

PayPal’s know-how and relationship with banks and regulators in various countries would allow Xoom to expand its digital transfer service, Xoom’s chief executive John Kunze told the Times.

Xoom’s online service lets individuals send money globally; frequently through smartphones – incurring a charge within $5 to $10 depending on the size of the exchange, and pocketing the difference in the exchange rates it sets. PayPal has been exploring new areas in which it could continue expanding its business, as in recent years smaller payment processing start ups like Square and Stripe have appeared.

PayPal, Inc. has recently announced that it will acquire Xoom Corporation for $25 per share in cash. Now, Xoom’s customers can likewise pay bills using the service.

PayPal also publicly released on Wednesday its historical quarterly financials from Q1-14 through Q1-15 as part of its separation from eBay.

“International remittances is an industry that is ripe for disruption”, said Paypal president Dan Schulman, who will become the CEO of the company once the spinoff from eBay is done. The IPO included 6.3 million shares that priced at $16 each, above the expected range of $13 to $15. “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 makes it more convenient for people to transfer money by sending it overseas electronically from mobile phones or PCs, similar to other Internet remittance services.

The purchase would give San Jose-based PayPal, which is splitting from eBay this month, an edge in global money transfers.

Due to anticipated one-time integration costs, the transaction is expected to be slightly dilutive to PayPal’s non-GAAP earnings per share for 2016.