Fitch: eBay's 'A-/F2' Ratings and Negative Watch Unaffected by PayPal's Acquisition of Xoom
July 02 2015 - 12:31PM
Business Wire
Fitch Ratings believes the ratings for eBay, Inc. (eBay) are
unaffected by PayPal's, its payments business, all-cash acquisition
of Xoom, which facilitates the digital transfer of money
internationally, for $890 million, or $25 per share. eBay's 'A-/F2'
Long-Term and Short-Term Issuer Default Ratings (IDR) remain on
Negative Watch in anticipation of the company's separation of
PayPal Inc. (PayPal) from eBay's Marketplaces business
(Marketplaces) scheduled for the second half of this month. A full
list of current ratings follows at the end of this press
release.
The acquisition of Xoom should strengthen PayPal's
international, particularly mobile, business by giving it access to
Xoom's 1.3 million active U.S. customers who sent roughly $7
billion to recipients in 37 countries, adding to PayPal's 68
million actives users. In particular, Xoom will expand PayPal's
capabilities in large and rapidly growing key emerging markets,
including India, China and the Philippines.
Xoom is primarily a cash based system of sending money abroad.
PayPal believes the acquisition will disrupt the nearly $600
billion international remittances industry, enabling more efficient
international remittance transactions. For Xoom, the deal should
accelerate the company's time to market in currently unserved
target geographies.
Fitch expects PayPal will use available cash for the
acquisition, which the company expects to close in the fourth
quarter of 2015. Fitch believes PayPal will use available domestic
cash to fund the acquisition and that liquidity, pro forma for
PayPal's separation from Marketplaces will be solid and supported
by $6 billion of net cash, a substantial portion of which will be
located in the U.S.
Xoom should add $168 million (for the latest 12 months (LTM)
ended March 31, 2015) of annual revenues growing in the high teens
to low 20s and at operating EBITDA margins in the low teens.
Leveraging PayPal's scale and footprint should drive some profit
margin expansion, given PayPal's Fitch estimated operating EBITDA
margin in the low to mid-20s.
Fitch maintains the following ratings for eBay Inc. on Rating
Watch Negative:
--Long-term IDR 'A-';
--Senior unsecured revolving credit facility 'A-';
--Senior unsecured notes 'A-';
Fitch affirms the following ratings:
--Short-term IDR at 'F2';
--$2 billion CP program at 'F2'.
Additional information is available 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (May 28, 2014).
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Fitch RatingsPrimary AnalystJason PompeiiSenior
Director+1-312-368-3210Fitch Ratings, Inc.70 W. Madison St.Chicago,
IL 60602orSecondary AnalystDavid PetersonSenior
Director+1-312-368-3177orCommittee ChairpersonSenior DirectorMonica
Bonar+1-212-908-0579orMedia Relations:Alyssa Castelli, +1
212-908-0540alyssa.castelli@fitchratings.com