PayPal has agreed to acquire Cloud-based bill payment management company TIO Networks for $233 million in cash. The deal will enable PayPal to gain access to a market of consumers who pay for cable and utility bills at kiosks in locations such as Rite Aid. This will assist the company in reaching the “undeserved” chunk of North Americans who are living paycheck-to-paycheck, some who lack bank accounts as well.
PayPal buys Canada-based TIO for this reason
Bill Ready, PayPal Chief Operating Officer told TechCrunch that there is a chance to create a bridge for those users into the digital world. They were not able to provide specifics on integration plans but the notion of bringing cash transactions to PayPal digital accounts is a concept that the bills payments company has been working on. The team has been trying to develop PayPal Cash that makes it simpler to convert cash into online payments.
Last year, the cloud-based bill payment processing firm processed about $7 billion in bill payments for its 14 million customers, throughout its 65k retail locations. The mission of TIO is to make it more affordable and convenient for customers to pay bills. In the dot-com boom, the Vancouver-based company went public on the Toronto Stock Exchange and it was trading about 25% below the acquisition price in recent months. Eventually, PayPal offered around $2.56 per share. The deal is expected to close later this year.
The online payments giant has now extended far beyond its name-bearing PayPal online checkout business. It has acquired Braintree that makes money by processing app payments for companies such as Airbnb and Uber. In addition to this, the internet payments giant owns peer-to-peer money transfer app Venmo.
TIO’s mission fits perfectly with PayPal’s vision: TIO’s CEO
In 2015, PayPal spun off from eBay. Presently, the internet payments giant is the larger of the two companies, with a market cap of $51 billion. The shares of the online payments giant are up over 21% in the past year. Last week, PayPal Holdings Inc. said that it is planning to purchase Canadian cloud-based payment processing firm TIO Networks Corp. for $2.56 a share in a deal valued at $233 million.
The price represents, as mentioned above, a premium of nearly 25.2% over the 90-day volume-weighted average price of TIO as of Monday. The California-based online payments company is planning to finance the acquisition with cash on its balance sheets. Also, its 2017 outlook would not be impacted by the transaction. The shares of the company were off 0.4% after hours.
In a news release, PayPal President and CEO Dan Schulman said, “By acquiring TIO and integrating bill payment into our global payments platform, PayPal adds another key service in our efforts to become a part of a consumer’s everyday financial life.” Hamed Shahbazi, the CEO and Chairman of TIO, said that the mission of his company fits perfectly with the vision of PayPal to democratize money.