USA based PayPal Holdings Inc. is set to acquire Sweden based iZettle AB for $2.2 billion. iZettle was supposed to set its prices for an initial public offering the next day.
iZettle competes with company such as Square Inc. and Canada’s Shopify Inc. and on May 8 it announced that it was seeking to raise 2 billion kronor($226.6 million) in an IPO to be completed this year. However, the Swedish fintech startup was bought by PayPal ten days later.
According to Johan Brenner, general partner at Creandum, an investor in iZettle:
“iZettle’s goal was to go for an IPO, there was no real dual track. The PayPal discussion became concrete extremely late and was only a done deal late last night.”
Up until May 8 IZettle Chief Executive Officer Jacob de Geer said the company was focused on the IPO plan but after a meeting with the executive team at PayPal he changed his mind and was convinced that iZettle would grow substantially under the new owner.
Bloomberg had reported in December that iZettle had been previously open to sale as an alternative to IPO. The acquisition is the biggest deal ever for PayPal according to data compiled by Bloomberg. This might be a shift in strategy by PayPal after it suffered a blow in February after a long time partner EBay Inc. shifted its payments business to Adyen BV, which a global payments company based in the Netherlands. Adyen is also considering IPO this year.
Phil Sealy, principal analyst at ABI Research commented:
“The acquisition of iZettle confirms a PayPal strategy of further expansion into the physical payments market in a bid to not only better compete, but to also remain relevant.”
Further commenting on how small and medium business are relying more on companies like iZettle and Square he said:
“It’s an area it’s not as well known for. The acquisition will provide PayPal an increased foothold in the European proximity payments market.”
The company will continue from its Stockholm headquarters and De Geer will continue to lead the business.
JPMorgan Chase & Co. was sole financial adviser to iZettle and PayPal worked with Evercore Inc.
iZettle was founded in 2010 by De Geer and Magnus Nilsson as mobile phone gadget for accepting credit card payments and later expanded into software and financing services to support small businesses. iZettle operates in 12 markets in Europe and Latin America and was valued at $500 million in January 2017.
PayPal Holdings is an American company operating a worldwide online payments system that supports online money transfers and serves as an electronic alternative to traditional paper methods like checks and money orders. The company operates as a payment processor for online vendors, auction sites and other commercial users, for which it charges a fee.
PayPal was established in December 1998 as Confinity, a company that developed security software for handheld devices.