PayPal board weighs Stripe-Advent bid amid valuation concerns

PayPal’s board considers a $53 billion takeover proposal from Stripe and Advent International inadequate, Reuters reported, citing people familiar with the matter. The offer, which Reuters said represents a 28% premium to PayPal’s closing share price on Tuesday, would rank among the largest transactions in the payments sector if it proceeded.

Reuters reported that the board has concerns about three central issues: the valuation placed on PayPal, the likelihood of regulatory approval, and the financing supporting the approach. PayPal has not delivered a formal response to the proposal, according to Reuters.

The approach was submitted earlier this month, Reuters reported. An anonymous source told Reuters that the bid is supported by about $50 billion of committed bank financing.

Stripe, a privately held payments company, and Advent, a private equity firm, have proposed keeping PayPal intact rather than separating the company into different assets, Reuters reported. Under the structure described by Reuters, Stripe and Advent would each hold an equal equity stake.

Reuters also reported that JPMorgan and Morgan Stanley are providing roughly $50 billion in financing for Stripe and Advent, while the bidders would contribute about $17 billion. In a takeover proposal, committed financing is intended to show that would-be buyers have arranged funding for the transaction, while equity contributions determine how much capital the bidders themselves put into the deal.

Board weighs bid against internal plan

PayPal’s directors are assessing the proposal alongside the company’s own restructuring plan and the possibility that another bidder could emerge, Reuters reported. That leaves the board evaluating both the immediate value of the offer and the execution risk attached to remaining independent.

PayPal is being reshaped under chief executive Enrique Lores, who has moved the company into a three-part operating model. The structure comprises Venmo, the consumer and merchant checkout business, and a unit that includes Braintree, small-business processing and crypto, according to the reported company reorganisation.

Lores has also closed PayPal’s venture capital arm. In May, he set out plans to use artificial intelligence to streamline operations, reduce duplication across workforce layers and generate about $1.5 billion in savings over the next two to three years.

The board’s reported caution reflects the regulatory and financial complexity of combining major payments businesses. A deal involving Stripe and PayPal would bring together two large digital payments operators, an issue likely to draw scrutiny from competition authorities, according to Reuters’ account of the board’s concerns.

No agreement has been announced. Reuters reported that PayPal continues to evaluate the bid, and the company has not formally answered the Stripe-Advent proposal.

This story draws on original reporting from Finextra Research.