PayPal spin-off may tempt Google

Any possible sale of either PayPal or EBay will be watched closely in Dublin and Dundalk, where the two employ almost 3,000 staff.

In June, PayPal announced 400 new Irish jobs, which followed on from the 1,000 jobs announced in 2012.

EBay announced yesterday that it was spinning off the PayPal payment-services business from its EBay online marketplaces, to unlock value at a $70bn (€56bn) company whose valuation has been sagging lately.

The move may make either half of the San José, California-based company a target, as industry acquirers from Alibaba to Google seek ways to further their dominance of the internet.

With a takeover of PayPal, Google — which also has a significant Irish operation — would stand to become the leader in online payments, which could be integrated into its Android system and counter Apple’s new Apple Pay, according to Gene Munster, an analyst at Piper Jaffray.

Alibaba, the Chinese e-commerce giant that just pulled off a record US trading debut and is on the hunt for deals, also could take an interest in PayPal, said Daniel Johnson, a money manager at River Road Asset Management in the US.

EBay marketplaces could draw bids too, because its robust cash-flow would appeal to buyout firms, he said. “Now that PayPal will be a separate company, there’s absolutely a possibility of an acquisition,” Mr Johnson said. “There’s a strategic benefit that PayPal would bring, whether it’s to Google or Alibaba.”

Private equity suitors “could see the value of the underlying cash flows at EBay marketplaces and the ability to leverage those cash flows to make an attractive return,” he said.

While Mr Johnson’s sum-of-the-parts estimate for EBay is in the mid-$60s, he said strategic buyers may be willing to pay a much higher price because of what they’d be gaining.

It could cost Google $50bn-$62bn to buy PayPal alone, according to an estimate in a recent report.

Alibaba and Google declined to comment.

* Business Post News Service (additional reporting from Bloomberg)