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The deal tracks rival Square Inc's agreement
last month to buy https://www.reuters.com/technology/square-buy-australias-afterpay-29-billion-2021-08-01
Australian BNPL success story Afterpay Ltd for $29 billion,
which experts said was likely the beginning of a consolidation
in the sector.
Buying Paidy will help PayPal expand in a country where online
shopping volume has more than tripled over the last 10 years to
some $200 billion, but more than two-thirds of all purchases are
still paid in cash, PayPal said in an investor presentation.
"I wouldn't view this (deal) as impacting the U.S. BNPL market
but more as PayPal's route into the Japanese market," Kunaal
Malde, analyst at Atlantic Equities, said.
Shares of the payments company were up 1% in heavy volumes in
premarket trading, while those of rival Square were marginally
lower.
Paidy, with more than 6 million registered users, offers payment
services that allow Japanese shoppers to make purchases online,
and then pay for them each month at a convenience store or via
bank transfer.
Japanese consumers have traditionally favoured cash but that has
changed in recent years, mostly in the cities, said Eiji
Taniguchi a senior economist at think-tank Japan Research
Institute Ltd.
"One of the notable things about Japan's BNPL market compared to
the United States or Europe is that most users clear their
outstanding balance by the end of the month in one payment. In
Japan accumulating debt is more frowned on."
Fuelled by federal stimulus checks, the BNPL business model has
been hugely successful during the pandemic, especially in
western countries.
These firms make money by charging merchants a fee to offer
small point-of-sale loans which shoppers repay in interest-free
instalments, bypassing credit checks.
Atlantic Equities analyst Malde said the Square-Afterpay deal
increased the urgency of establishing BNPL positions and could
have accelerated PayPal's deal for Paidy. He expects more such
deals in the sector.
Paypal, which is considered a leader in the BNPL market, entered
Australia last year, raising the stakes for smaller companies
such as Sezzle Inc.
The U.S. payments firm is among the big winners of the pandemic
as more people used its services to shop online and pay bills to
avoid stepping out.
Businesses, forced to move their stores online, also flocked to
PayPal, boosting its customer base of active accounts to more
than 400 million worldwide.
Paidy, whose backers include Soros Capital Management, Visa Inc
and Japanese trading house Itochu Corp, will continue to operate
its existing business and maintain its brand after the
acquisition.
Founder and Chairman Russell Cummer and Chief Executive Riku
Sugie will continue to hold their roles.
The Financial Times had reported last month that Paidy was
considering an initial public offering.
The transaction is expected to close in the fourth quarter, and
will be minimally dilutive to PayPal's adjusted earnings per
share in 2022.
BofA advised PayPal on the deal and Goldman Sachs advised Paidy.
White & Case was lead legal adviser for PayPal and Cooley LLP
and Mori Hamada & Matsumoto for Paidy.
(Reporting by Sayantani Ghosh in Singapore and Tim Kelly in
Tokyo, Additional reporting by Sohini Podder and Anirudh
Saligrama in Bengaluru; Editing by Ramakrishnan M., Kim Coghill,
Lincoln Feast and Arun Koyyur)
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