EBay to Buy PayPal’s Rival “Braintree” for $800 Million

To boost the business of electronic payment services, EBay has now declared to acquire Braintree for a sum of $800 million in cash.

EBay is the owner of PayPal which is fast becoming a successful electronic payment service all over the world. EBay believes that doing so will greatly benefit the company as it will help in expanding the mobile transactions business. EBay also briefly described the functionality of Braintree as being a global payments platform that collaborates with online/mobile-only businesses like “Airbnb” (room rental service) or “OPEN” (OpenTable Inc. which is an online restaurant-reservation company). Braintree is currently based in Chicago, USA and will soon become a part of PayPal.

PayPal being the number one fastest growing business for EBay is working towards expanding its core functionality from processing payments of online goods and services to processing payments in physical stores as well. Since the boom of smartphones and tablets in the last couple of years, consumers all around the world have started a trend to make online purchases. This has given rise to a multiple competitive companies in the payments industries such as Square Inc. or GOOG (Google Inc.). While talking about the soon-to-acquire Braintree, John Donahoe, the Chief Executive Officer for EBay, proudly stated in an interview:

“We’ve made a significant investment in mobile over the past couple of years. It’s a natural fit.”

The news has definitely impacted the financial status of EBay whose share rose by a 3.4% to $56.08 at 10:10 a.m. in US. It’s a good news to EBay since it had gained only 6.3% in the year of 2013 through yesterday as compared to a 19% increase for the “Standard & Poor’s 500 Index”.

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In 2002 PayPal was acquired by EBay for $1.18 billion. EBay claimed that Braintree is expected to have payments worth a $12 billion this year which will add to a gigantic sum of $20 billion that the company already expects to process in 2013. Furthermore, it has also been decided that Braintree CEO, Bill Ready, will have to report to the PayPal President, David Marcus.

Speaking on this breaking news, an RBC Capital Markets analyst, Mark Maganey, noted:

“This deal makes reasonable sense strategically as it expands PayPal’s distribution and removes a competitor. The deal is EBay’s biggest since March 2011, when it acquired GSI Commerce Inc. for $2.4 billion, a company that hosts retailers’ websites and offers marketing services to customers.”

Although the declaration of this acquisition may sound sudden, but PayPal and Braintree have actually been working together for more than a year – that is where the possibility of an acquisition arose and was sealed over the last month according to Donahoe.

EBay will not only acquire Braintree’s brand name. The company has 180 employees and owns Venmo, which is a payments startup whose technology allows for users authentication in a single application to be recognized in others. Vemno mobile app is also part of the advantageous deal for EBay.

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