The 10 Most Important Issues – 2015 Edition – 7

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Hugo Cuevas-Mohr puts together every year the 10 Most important Issues for the industry. To download the PDF go to Download/IMTC Publications.

It was a good year for Mergers & Acquisitions (M&As) in the IMTC&P Industry, with the most notable news coming from the U.S: The July, 2015, $890M deal for the purchase of XOOM by PayPal. You can google hundreds of news articles on PayPal’s acquisition of Xoom or read the SEC merger report.

Even if, in our industry, we all know Xoom very well, it was interesting to read an article in Market Mad House stating, “A lot of people were stunned and confused earlier this month when PayPal Holdings purchased an obscure company called Xoom on the verge of independence. Not surprisingly, many people were wondering what Xoom is and why PayPal wants it so badly.” Inside the industry, we all knew of the close relationship of the founders of both companies and their management teams. We all felt it was good for the industry as a whole to see major players like PayPal entering the ring.

But yes, the not so “obscure” company was bought at a surprisingly high cost, although very few analysts questioned PayPal’s valuation of Xoom and concentrated on the synergies that are quite obvious for industry experts. In this article by Jaguar Analytics, several industry analysts such as Robert Coolbrith (CRT), Neil Doshi (Mizuho), Ronald Josey (JMP), Colin Sebastian (RW Baird), Robert Peck (SunTrust) and James Friedman (Susquehanna) provided their opinions on the deal. You can read their comments to get a combined view of their thoughts; we chose Colin Sebastian’s to quote here:”Believes combination makes strategic sense and provides PayPal with incremental long-term growth opportunities; views move consistent with PayPal’s more explicit focus on international remittance; believes PayPal’s global scope makes it easier to roll out Xoom’s product to new transfer corridors with pre-existing regulatory approvals and merchant relationships; believes access to PayPal’s user base could help reaccelerate growth.

SaveOnSend provides its view and posted in a paragraph entitled White Knight on White Horse. “PayPal paid 80% premium for a company with rapidly deteriorating performance . . . by early April, Xoom stock was settling around $14, but then acquisition rumors began pushing its stock up. It kept going higher despite the disclosure of Q1, 2015 results that growth in transfer volume dropped to only 6% year-over-year vs. 49% a year earlier. While usually stock zooming up on acquisition rumours get acquired at that acquisition’s day value, PayPal paid another 20%+ on top of that run-up.” It will be interesting to follow the development of the Xoom-PayPal merger and watch the development of International Remittances by PayPal-Xoom.

Similarly, Russia and the CIS leading payment services provider Qiwi (with over 17M virtual wallets and close to 200,000 kiosks and terminals), announced the acquisition for $167 million USD of the Contact money transfer system and the Rapida payment processing system from Otkritie Holding, JSC. Qiwi, PLC, was the first Russian company to complete an IPO under the U.S. Jobs Act and is listed in NASDAQ. This merger will be also interesting to see, as well as some other M&As that are supposedly in the works. We will be watching.

Continue reading The 10 Most Important Issues of the International Money Transfer & Payments Industry for 2015 in this Blog or  To download the PDF go to Download/IMTC Publications.