PayPal to acquire buy now pay later firm Paidy in $2.7B deal

on Sep 8, 2021
  • PayPal Holdings is planning to purchase Japanese BNPL company Paidy in a cash deal of $2.7 billion
  • PayPal looking to take the lead position in the BNPL industry
  • The acquisition deal will finalize in Q4 2021 with current Paidy management keeping their positions

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Payments company PayPal Holdings Inc. (NASDAQ: PYPL) has announced that it will purchase Japanese buy now, pay later (BNPL) company Paidy a cash consideration of $2.7 billion. This acquisition is a significant step by the company to take the top position in the digital payments sector that is burgeoning as a result of the pandemic.

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PayPal competing with Square in the BNPL race

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Notably, PayPal’s deal comes at the back of competition Square Inc.’s (NYSE: SQ) agreement in August to acquire Australian buy now, pay later firm Afterpay for $29 billion. According to industry experts, this is possibly the start of consolidation in the industry.  The buy now, pay later business model was successful at the height of the COVID-19 pandemic, fuelled by upended customer credit markets and government stimulus checks.

These alternative credit companies generate revenue by charging retailers a fee to provide small point-of-sale loans that customers return in interest-free installments without having to go through a credit check. Apple and Goldman Sachs are the most recent heavyweights to be rumored to be working on a version of the service.

Last year, PayPal, a leader in the BNPL industry, expanded into Australia, upping the ante for smaller companies like Zip Co and Sezzle, whose stocks were down in noon trade on Wednesday.

Acquisition to expand PayPal’s capabilities

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PayPal said in a statement:

“The acquisition will expand PayPal’s capabilities, distribution and relevance in the domestic payments market in Japan, the third largest ecommerce market in the world, complementing the company’s existing cross-border ecommerce business in the country.”

Paidy will continue to operate its present activities and keep its brand following the acquisition. According to PayPal, its Chairman and Founder Russell Cummer and Chief Executive Officer and President Riku Sugie will remain in their positions.

According to Financial Times, Paidy was reportedly considering going public last month. Notably, PayPal’s adjusted earnings per share for 2022 will be minimally diluted as a result of the deal, which is slated to finalize in the fourth quarter this year.

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