PayPal To Buy Xoom For $890 Mln. In Cash

(RTTNews) - PayPal Inc on Wednesday said it has agreed to buy Xoom Corp (XOOM), a digital money transfer provider, for $890 million in cash. Following the announcement, Xoom shares jumped 22 percent in after-hours trade on the Nasdaq.

As per the terms of the deal, PayPal will pay $25 per share in cash, which is nearly 21 percent premium to Xoom's closing price of $20.70 Wednesday.

Owing to anticipated integration costs, the deal is expected to slightly reduce its earnings per share for the fiscal year 2016, PayPal said.

The deal, expected to close in the fourth quarter of 2015, was unanimously approved by the boards of of both companies, as well as the board of eBay Inc (EBAY), PayPal's parent company.

Xoom, based in San Francisco, enables customers in the U.S. to send money to, and pay bills for, family and friends globally using their mobile phones, tablets and computers.

"Acquiring Xoom allows PayPal to offer a broader range of services to our global customer base... Xoom's presence in 37 countries - in particular, Mexico, India, the Philippines, China and Brazil - will help us accelerate our expansion in these important markets," said Dan Schulman, president of PayPal.

Holders of about 18% of Xoom's outstanding shares - including all executive officers and directors of Xoom and certain entities affiliated with Sequoia Capital - have agreed to support the deal.

Upon closing of the acquisition, Xoom will operate as a separate service within PayPal.

The deal comes as PayPal splits off from EBay later this month; EBay's board last week approved the split. PayPal will start trading on the Nasdaq under the ticker "PYPL" from July 20.

The PayPal separation was announced last year after EBay was castigated by activist investor Carl Icahn that slowing growth in the online marketplace was holding back its payments division.

EBAY closed Wednesday at $60.42, up $0.18 or 0.31%, on a volume of 8.2 million shares on the Nasdaq.

Xoom closed at $20.70, down $0.35 or 1.69% in regular trade, but surged $4.56 or 22.03% at $25.26, in after hours.