US payments giant PayPal Holdings Inc. said it would acquire Japanese buy now, pay later (BNPL) firm Paidy in a $2.7 billion deal. The acquisition is said to offer PayPal a chance to win over Millennials and Gen Zers.
The PayPal – Paidy deal tracks rival Square Inc.’s agreement last month to takeover Australian BNPL firm Afterpay Ltd. for $29 billion. The deal is the largest-ever takeover in Australian history.
The BNPL space is becoming increasingly popular these days as everyone from giant retailers like Amazon to small merchants race to grab a bigger piece of the pie.
According to PayPal, the acquisition will be “minimally dilutive” to adjusted earnings per share in 2022. The PayPal – Paidy deal, which is expected to close in the fourth quarter, will be paid for with cash.
Japan, which is home to the world’s third-largest market for online shopping, is one of the few developed economies where paper currency is utilized for a majority of transactions. Nearly three-quarters of all transactions are paid for in cash.
Paidy, founded in 2008, is one of the few Japanese “unicorns” with more than $1 billion in valuation. The company launched its first zero-interest post-payment service during the pandemic last year. The platform has enabled 6 million registered users to split the cost of items into three equal instalments with no interest. Users can pay off their remaining balance using cash at convenience stores or bank transfers.
There is no better home for Paidy to continue to grow and innovate than PayPal, which has been removing friction from online shopping for more than 20 years,” said Russell Cummer, founder and executive chairman of Paidy.
“Paidy pioneered buy-now-pay-later solutions tailored to the Japanese market,” said Peter Kenevan, head of Japan at PayPal. “Combining Paidy’s brand, capabilities and talented team with PayPal’s expertise, resources and global scale will create a strong foundation to accelerate our momentum in this strategically important market.”
“Paidy is just at the beginning of our journey and joining PayPal will accelerate our plans to expand beyond ecommerce and build unique services as the new shopping standard,” said Riku Sugie, Paidy’s president and chief executive. “PayPal was a founding partner for Paidy Link and we look forward to working together to create even more value.”
Bank of America served as a financial adviser to PayPal, and White & Case was its head legal advisers for the acquisition. Goldman Sachs was Paidy’s financial advisers, and Colley and MHN were its legal advisers for the deal.
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