PayPal Heats Buy Now, Pay Later Race With $ 2.7 Billion Japan Deal

Sept. 7 (Reuters) – U.S. payments giant PayPal Holdings Inc (PYPL.O) announced it will acquire Japanese company Buy Now, Pay Later (BNPL) Paidy in a big deal part of $ 2.7 billion, taking a new step to claim first place in an industry experiencing a pandemic-induced boom.

The deal follows rival Square Inc’s (SQ.N) agreement last month to buy the Australian success story of BNPL Afterpay Ltd (APT.AX) for $ 29 billion, which experts said was likely the start of consolidation in the sector. Read more

“The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest e-commerce market in the world, thereby complementing the company’s existing cross-border e-commerce business in the country. “PayPal said in a statement Tuesday.

Fueled by federal stimulus checks, BNPL’s business model saw huge success during the pandemic and rocked consumer credit markets. These businesses make money by charging merchants a fee for offering small point-of-sale loans that buyers pay off in interest-free installments, bypassing credit checks.

Apple Inc (AAPL.O) and Goldman Sachs (GS.N) are the latest heavyweights to prepare their own version of the service. Read more

Paypal, already considered a leader in the BNPL market, also entered Australia last year, upping the ante for smaller companies such as Sezgle Inc and Z1P.AX Co Ltd (Z1P.AX), whose shares were down Wednesday at noon.

The U.S. payments company has been among the big winners in the COVID-19 pandemic, as more people have used its services to shop online and pay bills to avoid going out. Businesses, forced to move their stores online, have also flocked to PayPal, increasing its active account customer base to over 400 million worldwide.

Paydy’s purchase will help PayPal grow in Japan, where the volume of online purchases has more than tripled over the past 10 years to some $ 200 billion, but more than two-thirds of all purchases are still paid for. in cash, PayPal said in an investor presentation.

Paydy, with more than 6 million registered users, offers payment services that allow Japanese shoppers to make purchases online and then pay for them each month at a convenience store or by wire transfer.

The Financial Times reported last month that Paidy was considering becoming a publicly traded company.

Paidy, whose backers include Soros Capital Management, Visa Inc (VN) and Japanese trading house Itochu Corp (8001.T), will continue to operate its existing business and maintain its brand after the acquisition.

Founder and Chairman Russell Cummer and CEO Riku Sugie will continue to serve with the company, PayPal said.

The transaction is expected to close in the fourth quarter of 2021 and will have a minimal effect on PayPal’s adjusted earnings per share in 2022.

BofA was PayPal’s sole financial advisor in connection with the transaction, and White & Case was primary legal advisor. Goldman Sachs advised Paidy, and Cooley LLP and Mori Hamada & Matsumoto provided legal advice to Paidy.

Reporting by Anirudh Saligrama in Bengaluru and Sayantani Ghosh in Singapore; Editing by Ramakrishnan M., Kim Coghill and Lincoln Feast.

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