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PayPal To Buy Xoom, Western Union May Not Like It

PayPal To Buy Xoom, Western Union May Not Like It
Picture from PayPal/PayPal Website


PayPal To Buy Xoom, Western Union May Not Like It

PayPal, Inc. has recently announced that it will acquire Xoom Corporation for $25 per share in cash. This amounts to about $890 million in “enterprise value.” Moreover, this value is said to reflect a 32% premium over Xoom’s three-month volume-weighted average price. The said move was “unanimously approved” by both companies’ board of directors as well as the board from PayPal’s parent company, eBay Inc.

PayPal President Dan Schulman is very much delighted with PayPal’s recent acquisition. He said, “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. Xoom’s presence in 37 countries – in particular, Mexico, India, the Philippines, China and Brazil – will help us accelerate our expansion in these important markets.”

Xoom is highly known for its international remittance service in the U.S., allowing people to send money and pay bills for their family and friends anywhere in the world. It also proves to be a very easy and flexible system as customers can readily do their remittance on their mobile phones, tablets and computers.

Upon the announcement, Xoom President and Chief Executive Officer John Kunze explained, “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. Being part of a larger, global organization will help us deliver the best possible experience to our customers, while maximizing value for our shareholders.”

Furthermore, PayPal has said that their recent acquisition of Xoom brings about a lot of “strategic benefits” to PayPal customers. This includes being able to offer Xoom’s services to PayPal’s 68 million active customers, take Xoom’s services to new markets, deliver “Xoom’s compelling and reliable technology platform and consumer experience” with premium customer service and allow PayPal to enter Xoom’s propriety and fast “funds-out” marketplace in key international markets.

Meanwhile, experts believe that Xoom’s competitor, Western Union, may not take the news of PayPal’s latest acquisition well. As explained by Citigroup’s Ashwin Shirvaikar to Barron’s, “[eBay unit] PayPal’s recent announcement regarding its acquisition for Xoom is a negative for Western Union, in our view. In particular, Xoom has been a formidable competitor to Western Union’s online business, which although small (~5% of Western Union overall revenues), has represented nearly half of the growth in Western Union’s C2C segment in recent quarters. Clearly, a PayPal/Xoom combination is likely to lead to increasing competitive pressure on Western Union’s online business – with Xoom likely to leverage Paypal’s existing customer network, brand and financial resources to accelerate growth at the expense of competitors such as Western Union.”

PayPal believes that their acquisition of Xoom will be done by the fourth quarter of 2015. Upon acquisition, Xoom will reportedly operate as a separate service, but will be within PayPal.

About Jennifer Ong

Jennifer Ong has been covering and writing stories since 1998. Over the years, she has worked on stories on business, health, lifestyle, entertainment and travel. She has also previously written shows for television. When she's not on the job, she enjoys wine and Formula 1.

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