Photograph by Jeff Chiu — AP
By Leena Rao
July 1, 2015

PayPal has acquired money transfer company Xoom for $890 million to expand its digital payments business in prelude to splitting from parent, eBay.

Xoom, founded in 2001, lets people send money, pay bills and reload mobile phones from the United States to 37 countries. It is used widely by immigrants who send some of their earnings to family members back home.

PayPal’s president Dan Schulman said in a release that acquiring Xoom allows PayPal to offer a larger range of services, in overseas markets. Xoom has a particularly big presence in Mexico, India, the Philippines, China and Brazil.

Xoom will operate as a separate service within PayPal.

The acquisition comes shortly before PayPal spins off from eBay, which is expected later this month. PayPal will start publicly trading as an independent company on July 20. In the last quarter, PayPal’s payments revenue surpassed that of eBay’s marketplace business, highlighting their divergent paths as they prepare to separate.

In the first quarter of 2015, PayPal’s revenue grew 14% to $2.1 billion. Payment volume rose 18% to $61 billion and the number of transactions grew 24% to over 1 billion. Mobile payments through PayPal are up 40% year-over-year and now represent 30% of all transactions.

Outgoing eBay CEO John Donahoe had previously explained that the once-symbiotic relationship between the two businesses wasn’t as tight as it used to be and that they could do better alone while focusing on their respective businesses.

Interestingly, former PayPal CFO and Sequoia Capital partner Roelof Botha is on Xoom’s board.

PayPal is paying $25 per share for Xoom, representing a 32% premium above its average price over the past three months.

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