PayPal to acquire Xoom money transfer company

XoomPayPal have announced that they intend to acquire international money transfer company Xoom for $890 million.

Xoom enables customers (in the United States only at the moment) to send money to, and pay bills for, family and friends in 37 coutnries around the world in a secure, fast and cost-effective way, using their mobile phones, tablets or computers.

PayPal CEO in waiting Dan Schulman said “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“.

In other words PayPal want to expand their digital payments business rapidly following the split from eBay. PayPal list the benefits fo Xoom as:

  • Extends PayPal’s offering to its customers: Broadens PayPal’s consumer offering to its 68 million active U.S. customers by cross-selling Xoom’s services.
  • Accelerates time-to-market: Xoom’s proprietary and fast “funds-out” network enables PayPal to enter this growing marketplace with a leading technology solution with strong presence in key international markets.
  • Enables horizontal expansion into new markets: Allows Xoom to expand its portfolio of send-markets by leveraging PayPal’s wider international network.
  • Delivers a strong technology platform: Xoom’s compelling and reliable technology platform and consumer experience are coupled with its excellent customer service.

The acquisition is expected to close in the fourth quarter of 2015 and PayPal intends to fund the transaction with cash on their balance sheet at the time. This will have a slight effect on PayPal’s earnings but as the transaction will complete after they split from eBay it shouldn’t affect eBay earnings (although it could affect the share price before the split if investors view the acquisition favourably).