GoKawiilRumor mill: Stripe and the private equity firm Advent International have offered $60.50 a share for PayPal, a bid that values the veteran payments company at more than $53 billion and, if accepted, would fuse the two most widely used payment platforms for online merchants into a single operator handling roughly $3.7 trillion in payments each year. The offer was submitted earlier this month and carries about $50 billion in committed financing from banks, according to two people familiar with the matter, one of whom described the financing package.
The structure is what makes the offer unusual. Rather than carve up PayPal and sell off the parts, Stripe and Advent want to hold the company together, splitting ownership evenly between them, the people said.
Stripe has built its business almost entirely around merchants, supplying the software that lets companies accept card payments, sending payouts, and automating their finances. It has comparatively little contact with the shoppers on the other side of those transactions. PayPal is the mirror image. It brings more than 430 million consumer accounts and direct payment and banking relationships with the people spending the money.
Owning both ends of the transaction would let Stripe route more activity across infrastructure it controls, cutting its dependence on processors such as Visa and Mastercard – an important factor when every card transaction routed through those networks carries fees. Keeping more payments within a Stripe-PayPal system would help the combined company avoid some of those charges and capture more revenue per transaction.
The consumer side of PayPal is the prize. TD Cowen analyst Bryan Bergin told Reuters that PayPal's consumer products "could be attractive to materially accelerate" Stripe's work on a digital wallet, and that a deal would hand Stripe "direct consumer relationships, with a large user base and the potential for future financial-services distribution, an area in which PayPal has recently increased its efforts." Beyond the wallet, Stripe would absorb Venmo's peer-to-peer network and PayPal's familiar checkout button.
There is also a crypto dimension. Stripe has poured money into its crypto arm, Bridge, and a large base of PayPal consumers would give the company a ready-made channel to push stablecoin payments toward mainstream use, an area where distribution has been the main obstacle.
Whether PayPal's management will engage is an open question. William Blair analyst Andrew Jeffrey said that "we do not think PayPal's new CEO will likely embrace what could be viewed as a low-ball offer," and suggested that if the current bid is only an opening move, "we could see Stripe and Advent go as high as $70 per share." The people familiar with the matter said that the offer followed an earlier approach in April, that PayPal has not yet responded, and that Stripe and Advent hope to move the conversation forward in the coming weeks.
The overture comes as PayPal is mid-turnaround and trying to convince investors it can grow again. Founded in the late 1990s, it was one of the first companies to make digital payments routine. PayPal rode the pandemic e-commerce boom to a market value of about $360 billion in 2021, then watched much of that evaporate as Apple Pay, Google Pay, and other rivals lured consumers away. Its market capitalization sank to roughly $36 billion this year, and the stock has shed more than 40% of its value over the past 12 months.
Enrique Lores, who became chief executive in March, has been reshaping the company. In April, he split PayPal into three units covering checkout, consumer financial services including Venmo, and payments and crypto. He also reshuffled management. In May, he laid out a plan to use artificial intelligence to streamline operations and strip out overlapping layers of staff, without offering specifics.
Credit: App Economy Insights
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