The payment processing company Stripe and the private equity fund Advent International announced yesterday a $53 billion – or €46 billion – takeover bid to buy the digital payment service PayPal, a pioneer in online transactions. The bidders offer $60.50 per share, with a premium of about 28% over the previous closing price. Its shares rose 15% yesterday.
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Founded in the late nineties, PayPal was a pioneer in digital payments. Since then, it has struggled to modernize its payment technologies, while rivals like Apple and Alphabet have gained market share. Its shares have fallen 25% in the last year and 80% since the 2021 highs, when they traded above $300 per unit. The company has spent recent years dealing with slowing growth and increasingly intense competition, which has wiped out much of the value it gained during the pandemic.
Thus, despite its initial success story, PayPal has become increasingly smaller in market capitalization and today is around $50 billion, seven times less than at its peak. According to Bloomberg, it plans to cut about 20% of its workforce in the next two or three years. These adjustments are part of the effort by Enrique Lores, CEO appointed in March, to reduce costs and revitalize the payment company.
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For its part, Stripe, a private company founded by brothers Patrick and John Collison, is on a different path. It is one of the most promising players in the sector, with a valuation of $159 billion – about €140 billion. The company has been growing through acquisitions in recent years, such as the purchase of Bridge and Privy to expand into crypto payments. Payment companies are increasingly seeking scale through mergers and acquisitions, as well as access to faster-growing segments, such as cross-border and business-to-business payments, amid the slowdown in the traditional segment.
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