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PayPal in Play for Google as Leftover EBay Invites LBO: Real M&A 2014-09-30 15:51:29.665 GMT
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By Tara Lachapelle Sept. 30 (Bloomberg) -- A split of EBay Inc. may put the pieces in play. EBay announced today that it’s spinning off the PayPal payment-services business from its online marketplaces to unlock value at a $70 billion company whose valuation has been sagging lately. The move may make either half of the San Jose, California-based company a target as industry acquirers from Alibaba Group Holding Ltd. to Google Inc. seek ways to further their dominance of the Internet. With a takeover of PayPal, Google stands to become the leader in online payments, which could be integrated into its Android system and counter Apple Inc.’s new Apple Pay, according to Gene Munster, an analyst at Piper Jaffray Cos. Alibaba, the Chinese e-commerce giant that just pulled off a record U.S. 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 LLC. 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,” Johnson, whose firm oversees about $10 billion and owns EBay stock, said in a phone interview from Louisville, Kentucky. “There’s a strategic benefit that PayPal would bring, whether it’s to Google or Alibaba.”
Cash Cow
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 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. EBay closed yesterday at $52.66 before rising as much as 8.1 percent today. It traded at $56.51 at 11:48 a.m. in New York. It could cost Google $50 billion to $62 billion to buy PayPal alone, according to an estimate in a Sept. 15 report by Piper Jaffray’s Munster.
For Related News and Information: EBay Plans to Split Off PayPal as Mobile Payments Gain Momentum NSN NCPY7P6S9732 <GO> Alibaba Ambitions Signal Deals for Snapchat to Akamai: Real M&A NSN NBPDKS6VDKHU <GO> EBay Bulls at Record High as Apple Pay Threat Subsides: Options NSN NCA55X6TTDSA <GO> EBay deal news: EBAY US TCNI MNA <GO> Real M&A columns: NI REALMNA <GO> Top deal stories: DTOP <GO>
To contact the reporter on this story: Tara Lachapelle in New York at +1-212-617-8911 or tlachapelle@bloomberg.net To contact the editors responsible for this story: Beth Williams at +1-212-617-2307 or bewilliams@bloomberg.net Whitney Kisling