PayPal takeover: $53 billion from Stripe is probably not enough

Stripe and Advent are offering a massive $53 billion for PayPal, but the payment service provider apparently refuses. Although the price is significantly higher than the current share price, the board believes its own potential is undervalued.

Offer too low for PayPal

The American payment service provider PayPal is defending itself against a possible takeover by its competitor Stripe and the private equity company Advent International. The offer presented amounts to 53 billion dollars (around 46.3 billion euros). However, the board in San Jose doesn’t have enough money to hand the company over to someone else. The bidders are offering a price of $60.50 (around 53 euros) per share. Although this represents a premium to the recent stock market price, from the management perspective it does not reflect the long-term potential. PayPal’s share price has suffered greatly in recent years, falling from almost $300 (around €262) to around $41 (around €36) at times.

As per a report by Reuters management instead relies on its own restructuring plan. CEO Enrique Lores, who took office in February, wants to achieve stable growth again through restructuring and cost-cutting measures. According to the report, the board believes the route will generate more value for shareholders than an immediate sale.

Antitrust concerns

In addition to the financial aspect, the PayPal board sees further risks in a possible merger. A merger between the two online payment processors brings the competition watchdogs into action. In order to prevent antitrust problems, the bidders are already examining the spin-off of certain business areas, such as the subsidiary Braintree. The focus is also on financing the transaction. The banks JPMorgan and Morgan Stanley have agreed to a package worth around $50 billion (around €43.7 billion). Stripe and Advent are also contributing $17 billion (around €14.9 billion) in equity capital.

The pressure on PayPal remains high. The company has been losing market share to Apple Pay and Google Pay for months. The new quarterly figures will be available on July 28th. The reports will show whether the core business is stabilizing or whether the arguments for a takeover by Stripe are gaining weight again.