San Jose, California-based PayPal recently approached
Pinterest about a potential deal, said people with knowledge of the matter, who
asked not to be identified because the details are private.
The companies have discussed a price of around US$70 (RM291)
a share, the people said.
That would value Pinterest at about US$45bil (RM187bil) for
the entire company, including its Class B shares, and would represent about a
26% premium to Pinterest’s Tuesday closing price.
A deal for Pinterest would be PayPal’s biggest-ever
acquisition, topping its US$4bil (RM16.6bil) purchase of price-comparison app
Honey Science Corp last year.
Under chief executive officer Dan Schulman, the company has
set its sights on becoming a one-stop shop for all things shopping and finance,
akin to China’s Alipay or WeChat.
PayPal plans to add a bevy of new services to its revamped
app, including high-yield savings accounts, check-cashing services and
stock-investing capabilities.
At roughly US$45bil (RM187bil), an announced deal would push
2021 over the line to become the busiest-ever year for mergers and
acquisitions, topping 2007’s record tally.
A boom in online shopping has helped PayPal stock more than
double since the start of last year, giving the company a strong currency it
could use for acquisitions.
The shares fell 4.9% on Wednesday, valuing PayPal at about
US$304bil (RM1.26 trillion).
PayPal’s interest comes at a complicated time for Pinterest.
The social media company announced this month that
co-founder Evan Sharp, who oversaw its design and product teams, is stepping
down. It’s also been dealing with a number of accusations from former employees
that Pinterest discriminated against female workers.
Pinterest went public in a 2019 initial public offering
valuing the company at just over US$10bil (RM41.6bil).
Its shares closed up 13% at US$62.68 (RM262.44), giving the
company a market valuation of US$40bil (RM166.2bil).
The deal would be a “big swing for PayPal, and would
represent a meaningful entry into the advertising business,” Ramsey El-Assal,
an analyst at Barclays Plc, wrote in a note.
Terms of a transaction could still change, and there’s no
certainty the talks will lead to an agreement, the people said. A
representative for PayPal didn’t respond to a request for comment, while a
spokesperson for Pinterest couldn’t immediately comment.
With the planned changes aimed at making it the world’s next
super app, PayPal has said it expects the number of active users on its
sprawling platform to climb to 750 million, from 403 million, by the end of
2025.
If Schulman is able to pull it off, the company could become
an even more central part of consumers’ lives, like a Facebook Inc or an
Amazon.com Inc.
Pinterest offers a visual search and scrapbooking platform
where users can save, collect and group images by themes. It benefited in the
early stages of the pandemic as advertisers flocked to social media sites to
woo a captive audience that embraced a shift to e-commerce.
The company has been introducing new tools to help creators
make their “pins” shoppable, drawing a more direct connection between content
on Pinterest’s site and online purchases.
Buying Pinterest would push PayPal into the often arduous
and costly business of weeding out harmful content posted by users -- a
challenge faced by all of the major social media platforms, including Facebook.
Earlier this year Pinterest banned ads with weight-loss imagery and language to
prevent content that could foster unhealthy eating habits; in years past, the
company has had to take measures to combat the spread of misinformation about
vaccines.
Pinterest is also coming to terms with a post-pandemic
slowdown in usage. In July the company’s shares plummeted after it reported
fewer monthly active users – a key metric for social media companies – than
analysts had predicted.
“We see how it can make sense for the company,” Sanjay
Sakhrani, an analyst at Keefe Bruyette & Woods Inc, wrote in a note to
clients.
“Pinterest could enhance engagement between consumers and
merchants with PayPal being a central facilitator in the commerce journey,
thereby feeding into the company’s vision of being a super app.”
Not all analysts viewed the potential deal so favourably.
“We see such a move as an act of near desperation,” wrote
Truist Financial Corp’s Andrew Jeffrey, citing competition from other
companies’ “buy buttons” and the tie-up between Square and Afterpay as threats
to PayPal’s business. ― Bloomberg
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