On Wednesday, PayPal, the online payments company weeks far from a projected spinoff from eBay, has jumped into the developing digital money transfer business by purchasing Xoom Corporation (NASDAQ:XOOM), a significant player in the field.
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Cross-selling Xoom’s capabilities will expand the set of offerings that PayPal’s existing user base in the US can leverage, not to mention fast track its ability to enable global money transfer in attractive “receive” markets such as Mexico, India, the Philippines, China and Brazil. PayPal’s acquisition of Xoom Corp (NASDAQ:XOOM) comes just weeks before its expected spin-off from eBay.
The completion of the transaction is expected to “slightly dilutive” to PayPal’s non-GAAP EPS for the next financial year, and upon the closing of the acquisition, Xoom will operate as a separate service within PayPal.
Applied Genetic will be eligible for milestone payments and royalties ranging from high single-digit to mid-teen percentages of annual net sales for approved drugs that result from the companies’ collaboration. On the first day of trading, the shares popped more than 40% to trade above $25.
Xoom is among the upstarts challenging long-established money transfer businesses like Western Union in the huge global remittances market, which is worth about $600 billion by the World Bank this year.
“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”.
Shares traded up about 24% in Thursday’s premarket, at $25.65 in a 52-week range of $13.14 to $26.94. He added that the company’s competence and relationship with regulators and banks in many countries would enable Xoom to grow further.
Founded in 200, Xoom was initially backed by venture firms including Sequoia Capital, New Enterprise Associates, SVB Capital, and Fidelity Ventures until it went public in 2013 raising $509 million.
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The prospects are enticing companies outside financial services as well. PayPal has enjoyed rapid growth as more consumers have made purchases online, in mobile apps and while using mobile-payments systems such as Apple Pay. With the acquisition, it seems to be taking the right steps to bolster its capabilities. Click to get this free report >>.
