PayPal said it would buy the Japanese company buy now, pay later (BNPL) Paidy in a $2.7 billion (about INR 19,840 crores) deal largely up front, taking another step towards claiming first place in a industry witnessing a pandemic-led boom.
The deal follows rival Square’s deal last month to buy the success story of Australian BNPL Afterpay for $29bn (about Rs. 2,13,450 crores), which experts said was likely the start of a consolidation in the sector. .
BNPL’s business model was extremely successful during the pandemic, fueled by federal stimulus checks and upheavals in consumer credit markets.
These alternative lending firms make money by charging merchants a fee to offer small point-of-sale loans, which customers pay in interest-free installments, bypassing credit checks.
Heavyweights such as Apple and Goldman Sachs are the most recent heavyweights reported to be preparing a version of the service.
Paypal, already considered a leader in the BNPL market, also entered Australia last year, boosting the participation of smaller companies such as Sezzle and Z1P.AX, whose shares fell in midday trading on Wednesday.
“The acquisition will expand PayPal’s capabilities, distribution and relevance in Japan’s domestic payments market, the third largest e-commerce market in the world, complementing the company’s international e-commerce business in the country,” PayPal said in a statement in Tuesday .
After the acquisition, Paidy will continue to operate its existing business and maintain its brand. Founder and Chairman Russell Cummer and President and Chief Executive Officer Riku Sugie will continue to serve at the company, PayPal said.
The Financial Times reported last month that Paidy was considering becoming a publicly traded company.
The transaction is expected to close in the fourth quarter of 2021 and will be minimally dilutive to PayPal’s adjusted earnings per share in 2022.
BofA Securities was PayPal’s sole financial advisor in the business, and White & Case was the primary legal advisor. Goldman Sachs advised Paidy, and Cooley and Mori Hamada & Matsumoto provided legal counsel.
© Thomson Reuters 2021