PayPal board says $53B Stripe and Advent bid undervalues company

PayPal’s board has determined that a $53 billion takeover proposal from Stripe and Advent International undervalues the company while raising financing and regulatory concerns, even as discussions continue.

Reuters reported that PayPal’s board believes the consortium’s $60.50-per-share offer does not fully capture the value the company could generate if its turnaround plan succeeds, according to a person familiar with the matter. The proposal values PayPal at about $53 billion and represents a premium over the company’s recent trading price.

While the board has not formally responded to the offer, Reuters reported that directors are reviewing both the bid and the possibility of competing proposals before deciding on the company’s next steps. 

Alongside the purchase price, the board is weighing the certainty of financing, possible regulatory obstacles, and the time needed to complete such a transaction, the report said.

Shares of PayPal rose about 2% on Thursday to $56.73.

Earlier this month, Stripe and private equity firm Advent International submitted the joint proposal after first approaching PayPal with Block in April. Reuters previously reported that Block later exited the consortium before the latest offer was presented.

Financing package and deal structure

According to Reuters, JPMorgan and Morgan Stanley have assembled a financing package of roughly $50 billion to back the acquisition, while Stripe and Advent would contribute about $17 billion in equity. Under the proposal, the two companies would jointly own PayPal with equal stakes instead of splitting the business into separate entities.

People familiar with the discussions told Reuters the consortium has also explored possible remedies should antitrust regulators raise concerns. One option under consideration would be to separate PayPal’s Braintree business or certain other assets and transfer them to Advent, where they could be combined with the firm’s existing payments investments, including Nuvei.

Although PayPal has reservations about the current terms, Reuters reported that Stripe and Advent remain interested in reaching an agreement and continue to be viewed as the most serious bidders. The sources added that negotiations are expected to continue and may take time before any outcome becomes clear.

Turnaround plan and crypto business remain in focus

Investors are now looking ahead to PayPal’s July 28 earnings report for evidence that its core checkout business is recovering after the company issued weaker-than-expected guidance earlier this year and warned of slowing momentum in the segment, Reuters reported.

PayPal has been restructuring its operations under CEO Enrique Lores, who took over in March. In April, the company reorganized its business into three divisions covering checkout, Venmo consumer financial services, and payments and crypto. First-quarter revenue rose 7% year over year to $8.35 billion, while payment volume increased 8% on a currency-neutral basis to about $464 billion.

The company’s crypto operations include PayPal USD (PYUSD), a dollar-backed stablecoin issued by Paxos and backed by U.S. dollar deposits, Treasuries and similar cash equivalents. PYUSD recently expanded natively to Polygon through the network’s Open Money Stack, giving businesses access to stablecoin payments, settlement, fiat conversion and compliance services.

The proposed acquisition would also unite PayPal’s crypto payment products with Stripe’s expanding stablecoin infrastructure. Stripe strengthened its blockchain payments business through its roughly $1.1 billion acquisition of stablecoin platform Bridge and has since expanded stablecoin payment services across multiple technology platforms and blockchain networks.

According to Reuters, Advent joined the bid because funding the entire equity portion would be difficult for privately held Stripe alone. The private equity firm’s long history of investments in payment companies, including Worldpay, Vantiv, and Nuvei, could also provide additional flexibility if regulators require changes to the transaction structure. 

Reuters noted that the size of the proposed acquisition and potential antitrust scrutiny could complicate any path to a completed deal.