PayPal board believes $53bn Stripe-Advent takeover offer is too low

Patrick and John Collison, founders of Stripe.  PayPal’s board sees a $53bn (€46.3bn) takeover bid by Irish rival Stripe and private equity firm Advent International as undervaluing the company and facing regulatory and financing hurdles

PayPal’s board sees a $53bn (€46.3bn) takeover bid by Irish rival Stripe and private equity firm Advent International as undervaluing the company and facing regulatory and financing hurdles, a person familiar with the matter said, potentially setting the stage for negotiations over the future of the US payments giant.

PayPal has not formally responded to the proposal, two other sources said.

The consortium's bid comes as PayPal, founded in the late 1990s, has struggled in recent years to compete against rivals like Apple Pay and Google Pay, with management trying to revive its flagging share price in the face of slowing growth. Combining Stripe and PayPal, the most widely used payment platforms for internet merchants, would create one of the world's largest global online payments companies, processing some $3.7 trillion of annual volume.

Stripe, founded by Limerick brothers Patrick and John Collison, has become one of the industry’s most coveted players. In February, Stripe announced it had reached a €135bn valuation in an employee tender offer.

PayPal's board is evaluating the bid – and the possibility that other offers could emerge – against management’s turnaround strategy, the person said. Its early view is that while the $60.50 per share offer represents a premium to the company’s recent share price, it does not fully reflect the potential value the company could create over the coming years if management successfully executes its strategy, the source said.

PayPal shares closed up about 2% on Thursday. The stock was last down 1.7% in premarket trading on Friday.

The board is also weighing factors beyond price, including the certainty of financing, potential regulatory hurdles and what could be a lengthy timeline to complete any transaction, the source added. It is scheduled to hold additional meetings, the source said. The details of the board’s view are reported here for the first time.

The consortium, meanwhile, is trying to address some of these issues. JPMorgan and Morgan Stanley  have provided the bidders a roughly $50bn financing package, two other people familiar with the bid said. The two banks also serve as advisers to the consortium, they added.

Stripe and Advent are contributing $17bn in equity for the offer, one of the people said.

PayPal, Advent, JPMorgan, Morgan Stanley, and Stripe declined to comment.

Under the offer, which was submitted earlier this month, Stripe and Advent would jointly own PayPal, with each holding an equal stake rather than breaking up the company, Reuters previously reported. But they have also considered possible remedies should it run afoul of antitrust regulators, one of the sources said.

That potentially involves separating PayPal’s Braintree business or other assets and transferring them to Advent, which could then combine those assets with its payments investments, including Nuvei, the person said.

Despite PayPal's reservations over the current proposal, the sources said the consortium has emerged as the most serious bidder for PayPal and it remains interested in reaching an agreement. While they are seeking to move quickly, negotiations are likely to take time, the sources said.

Reuters