KKR Announces Acquisition of PayPal Buy Now, Pay Later Loans Valued at Nearly $44 Billion

KKR, a prominent investment firm, announces the acquisition of nearly $44 billion worth of PayPal's buy now, pay later loans in Europe. Learn about the deal's implications and its impact on PayPal's growth forecast.

Jun 20, 2023 - 08:32
Jun 20, 2023 - 08:33
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KKR Announces Acquisition of PayPal Buy Now, Pay Later Loans Valued at Nearly $44 Billion
KKR Announces Acquisition of PayPal Buy Now, Pay Later Loans Valued at Nearly $44 Billion

KKR, an esteemed investment firm, has unveiled its plans to acquire a substantial portion, estimated at around 40 billion euros ($43.71 billion), of PayPal's buy now, pay later (BNPL) loans in the European market. This acquisition marks a significant move for both parties involved, as confirmed by PayPal on Tuesday.

The buy now, pay later trend has witnessed remarkable popularity, particularly among millennials and Gen Z customers, during the pandemic. However, the sector faced challenges last year due to the impact of rising interest rates and inflation, which had a dampening effect on consumers' purchasing power.

Following the announcement of this deal, PayPal experienced a notable 2% increase in premarket trading, indicating a positive response from investors. The transaction is expected to generate approximately $1.8 billion in gross proceeds and is anticipated to be finalized in the latter half of this year.

PayPal has clarified that its growth forecast for adjusted profit, which was shared in May and projected a 20% increase on a per-share basis, had already incorporated the impact of this acquisition. Notably, this forecast exceeded Wall Street estimates, highlighting the potential value that the deal brings to PayPal's financial performance.

Once the acquisition is completed, PayPal intends to allocate approximately $1 billion for incremental share repurchases in 2023. This strategic move aligns with the company's broader outlook, which aims to achieve a total of $5 billion in share repurchases by the end of this year.

In 2022, PayPal processed an impressive volume of over $20 billion in BNPL payments globally, representing a staggering 160% increase compared to the previous year. Since the introduction of its BNPL service in 2020, PayPal has successfully issued more than 200 million loans to an extensive customer base of over 30 million individuals across the globe.

PayPal has reassured its customers that it will retain full responsibility for all customer-facing activities, including underwriting and servicing, associated with its European BNPL products. This commitment ensures a seamless and consistent experience for users.

It is important to note that the exchange rate for this transaction stands at $1 = 0.9151 euros, providing a benchmark for evaluating the value and magnitude of the deal.

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