EBay Inc. (EBAY), owner of electronic-payments service PayPal, said it will bolster that business by buying Braintree for $800 million in cash to expand its mobile-transactions business.
Braintree, a global payments platform, works with online and mobile-only startups such as room-rental service Airbnb and online restaurant-reservation company OpenTable Inc. (OPEN), EBay said in a statement today. Braintree, which is based in Chicago, will become a unit of PayPal.
PayPal, which is one of EBay’s fastest-growing businesses, is pushing beyond processing payments for goods sold online and expanding its service into physical stores and other areas. The payments industry -- and especially mobile payments -- has become highly competitive in recent years as startups including Square Inc. and large technology companies such as Google Inc. (GOOG) have plunged in, with more consumers making purchases through devices like smartphones and tablets.
“We’ve made a significant investment in mobile over the past couple of years,” EBay Chief Executive Officer John Donahoe said in an interview. “It’s a natural fit.”
EBay rose 4.5 percent to $56.64 today. The shares are up 11 percent this year, compared with a 19 percent gain in the Standard & Poor’s 500 Index.
EBay, which acquired PayPal in 2002 for $1.18 billion, said Braintree projects payments volume of $12 billion this year, adding to $20 billion the company expects to process over the same period. Braintree CEO Bill Ready will report to PayPal President David Marcus.
“This deal makes reasonable sense strategically as it expands PayPal’s distribution and removes a competitor,” said Mark Mahaney, an analyst at RBC Capital Markets, in a note.
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.
PayPal and Braintree have worked together for more than a year, and the two companies began discussing an acquisition about six weeks ago, Donahoe said. The deal solidified over the past month, he added.
Braintree, which was founded in 2007 and has more than 180 employees, in 2012 acquired payments startup Venmo. Venmo’s technology allows users to authenticate themselves in one app and automatically be recognized in other apps. EBay said the Venmo mobile app is part of the acquisition.
“Some of the early opportunity is to take Venmo one-touch payments and have it extend to other properties,” Donahoe said.
He said the Braintree team will stay “very focused” on building products that are attractive to developers and entrepreneurs.
Marcus, who took PayPal’s helm in 2012, has been trying to reduce bureaucracy and give developers more freedom to be creative after the business drew criticism for antiquated technology that wasn’t developer friendly.
EBay, based in San Jose, California, said PayPal contributed 40 percent of total revenue last year. In the second quarter, PayPal’s revenue rose 20 percent to $1.6 billion, while EBay’s total revenue growth rate was 14 percent.
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