PayPal is paying how much for Xoom?

Paypal has entered into a definitive agreement to acquire money transfer provider Xoom for $25 per share in cash, or an approximate $890m enterprise value.

The transaction represents a premium of 32% over Xoom’s three-month volume-weighted average price and was unanimously approved by the Boards of Directors of both companies, as well as the Board of eBay Inc., PayPal’s parent company.

The deal is expected to be completed in the fourth quarter of this year, probably after PayPal separates from eBay, which is expected to happen on 17th July.

Last week, Bill Harris, the former CEO of PayPal, said he felt that payment firm will struggle to compete with the likes of Apple and Google during its transition into the retail world.

‘‘I think they are going to struggle, because there is so much more momentum in the mobile and retail space from other players than PayPal, and they are playing catch-up… It’s not really going to see results until the next 6-12 months,’’

However, the acquisition of Xoom will give PayPal a much stronger position on the international arena by giving it access to Xoom’s 1.3 million active users in the US, who sent an estimated $7 billion in the 12 months ending on 31st March to people in 37 countries around the world.

The proposed acquisition of Xoom comes just months after PayPal shelled out $280m on Paydiant, a mobile payments start-up.

“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,” said Dan Schulman, President of PayPal.

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