PayPal Holdings Inc. (PYPL) agreed to buy European payments services provider iZettle for $2.2 billion. The deal, which is expected to be completed in the third quarter of 2018, is estimated to be dilutive to PayPal’s full-year adjusted EPS guidance by $0.01.
iZettle is a Stockholm-based financial technology startup whose most popular creation is a card-reading device that enables payments through smartphones and tablets. The company intends to go public through a listing on the Stockholm stock exchange.
iZettle’s operations will continue to be handled by its CEO Jacob de Greer post the acquisition by PayPal. iZettle is estimated to process $6 billion of payment volume and bring in revenues of $165 million this year.
After its separation from Ebay, PayPal branched out into a payments services company that provides a whole host of services worldwide. This is PayPal’s largest acquisition till date and it is expected to provide expansion opportunities into the in-store payments arena.
The deal is estimated to be dilutive to PayPal’s full-year adjusted EPS guidance by $0.01
iZettle has a presence in 11 countries and combining with PayPal will facilitate its expansion into the US as well as many other countries. Meanwhile, PayPal has operations in 200 countries and its acquisition of iZettle will help the company attain an in-store presence in locations like Brazil and Mexico.
PayPal has been looking for strategic M&A opportunities for growth and expansion. This acquisition will help PayPal strengthen its position against its rival Square Inc (SQ). While PayPal looks to enhance its brick-and-mortar presence, Square is trying to develop a stronger ecommerce strategy and the latter’s recent acquisition of Weebly is part of these efforts.
Payment companies are seeing omnichannel commerce as an important part of their growth strategy as small businesses are looking for firms that can provide them with a single solution for their offline and online payment requirements. The iZettle acquisition will pave the path for PayPal’s growth in this respect.