PayPal and KKR Reach Agreement for PayPal's “Buy Now, Pay Later” EU Loans

Key takeaways

  • KKR has agreed to buy PayPal's “Buy Now, Pay Later” option. (BNPL) in Europe.
  • The agreement allows KKR to purchase up to €40 million ($43.7 million) of BNPL loans.
  • PayPal will use a portion of the proceeds for share buybacks.

Shares of PayPal Holdings (PYPL) rose on Tuesday after the electronic payment system provider reached an agreement with KKR allowing the private equity firm to buy up to 40 million; euros ($43.7 million) in “buy now, pay later” (BNPL) loans from PayPal in Europe.

The companies said the deal will see KKR's private credit funds and accounts acquire “substantially all of BNPL's European loan portfolio” and future BNPL qualifying loan originations.

PayPal noted that the transaction, which is expected to close in the second half, will initially generate $1.8 billion. It plans to use $1 billion of that sum for additional share buybacks, bringing those buybacks to $5 billion this year. 

Gabrielle Rabinovitch, PayPal's senior vice president and interim chief financial officer, explained that the BNPL has become “a major asset to PayPal's payment experience”, and that the collaboration with KKR will allow the BNPL to company to accelerate its PayPal Pay Later builds in line with market demand in Europe while “preserving free cash flow for other strategic initiatives.

Vaibhav Piplapure, Managing Director at KKR, said the move strengthens the footprint of the company in consumer finance and that PayPal Pay Later “offers a differentiated experience that positions PayPal to capture additional share in this growing market”.

PayPal shares soared 3.7% on Tuesday following the news.

YCharts

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Source: investopedia.com

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