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Merger and Acquisition

The Divorce of eBay and PayPal

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As far as divorces go, the split-up of eBay and PayPal has been so far a reasonably amicable one. What’s ironic is eBay bought PayPal for $1.5 billion in 2002, while its value today is estimated to be $45 billion. Conversely, eBay is today valued much lower at $30 billion. This has been a large driving force for the merger with active investor Carl Icahn stating “PayPal’s a jewel and eBay is covering up its value.”

eBay’s last quarterly results also seem to back this up showing PayPal’s revenue growing by 20% compared to eBay marketplace down 1%. In the release of final figures for the joint company (Q2) to June 2015 eBay reported earnings of $931 million, or 76 cents per share. This is up considerably from the same period last year which came in at $883 million, or 70 cents a share. However, PayPal’s dominance is obvious, contributing $2.26 billion of eBay’s Q2 revenue. eBay’s marketplace business contributed $2.12 billion to the joint company.

Another reason for the split is that they are both very different businesses operating in different markets. Elon Musk one of the co-founders of PayPal agrees: “It doesn’t make sense that a global payment system is a subsidiary of an auction website. It’s as if Target owned Visa or something.” Separating them will allow each to focus on their own set of unique priorities.

There’s another factor: technology markets change very quickly and a business needs to be responsive to change if they are to survive. PayPal in particular faces new competition with Apple Pay (which allows payments via phone). Apple has shown an ability to make complex technology easy to use for their customers – and they have many millions of dedicated followers. The impact of Apple Pay on PayPal’s business cannot be underestimated.

The benefit to PayPal investors is clear with both Elon Musk and former chief operating officer David Sacks predicting that PayPal could in the near future be worth more than $100 billion. PayPal has already been expanding its business with a series of acquisitions such as Xoom (which transfers funds from America to many developing countries), Paydiant (which helps retailers to operate mobile wallets) and Braintree (which processes transactions for mobile apps). The separation from eBay will put PayPal in a strong position to continue this trend with around $6 billion in cash reserves.

The way forward for eBay seems less certain. Part of the problem today is that its growth was pioneered as being one of the first auction sites. Today it is viewed as an auction site when consumers are tending to prefer a quick online purchase direct from stores. Never mind that 80% of goods on eBay are offered for sale not auction, the perception persists. However, eBay’s a stable investment too. US 85 billion worth of transactions were carried out on eBay last year. It’s hard to imagine that being rivaled by a competitor. Also without PayPal eBay will have more cash to focus on its own bread and butter operations.

All this is likely to benefit investors in both companies. While the saying goes that an entity can be worth more than the sum of its parts, in this case, the reverse is true, the valuation of the two separate companies after spin-off is likely to be greater than their valuation as one.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Merger and Acquisition

Bankman-Fried’s FTX Says no Talks to Acquire Robinhood

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Sam Bankman-Fried’s FTX crypto exchange said it is not in talks to acquire Robinhood Markets Inc, after a report on Monday claimed the exchange was exploring such a deal.

Bloomberg News reported on Monday FTX was discussing internally how to buy the app-based brokerage and that Robinhood had not received a formal takeover approach, citing people with knowledge of the matter.

“There are no active M&A conversations with Robinhood,” Bankman-Fried said in an emailed statement.”We are excited about Robinhood’s business prospects and potential ways we could partner with them.”

Robinhood declined to comment. The retail-trading platform’s shares were down 5% in extended trading after jumping over 14% on the report.

Last month, the founder and chief executive of FTX revealed a 7.6% stake in Robinhood but said he did not have any intention of taking control of the retail-trading platform.

Robinhood’s dual-class shares give its founders control of 64% of the voting shares outstanding, making it virtually impossible for takeovers without their support.

The popular trading platform has come under pressure this year as trading volumes ease from 2021’s frenetic pace – when retail investors used it to pump money into shares of so-called meme stocks such as GameStop and AMC Entertainment.

That slowdown, along with a sell-off in high-growth technology stocks, has driven a near 50% slump in Robinhood shares this year. The company had a market valuation of nearly $7 billion as of Friday’s closing price.

FTX’s U.S. arm announced in May it would launch a stock trading platform by the end of the summer. Last week, it acquired partner Embedded Financial Technologies for an undisclosed amount, which would add custody, execution and clearing services to its equity trading platform.

FTX and its billionaire founder Bankman-Fried have rescued other players during the crypto market’s recent crash. It provided crypto lender BlockFi with a $250 million revolving credit facility to help the firm avoid a liquidity crunch.

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Merger and Acquisition

Access Bank Moves to Acquire 83% Stake in Kenya’s Sidian Bank Limited

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Access Bank Plc, a subsidiary of Access Bank Holdings Plc, has entered into a binding agreement with Centum Investment Plc for the acquisition of 83.4% equity held by Centum in Sidian Bank Limited in Kenya.

Access Bank announced the acquisition in a statement signed by Sunday Ekwochi, Company Secretary, Access Bank and obtained by Investors King.

The acquisition is estimated at US$37 million or N15 billion. This represents a price to book multiple of 1.1x based on the audited 31 Match 2022 shareholder’s equity of Sidian.

According to Access Bank, upon completion of the acquisition, Sidian will be merged with Access Bank’s subsidiary in Kenya, Access Bank Kenya to create a stronger banking institution better positioned to serve the Kenyan market.

Commenting on the deal, the Group Chief Executive, Access Bank, Mr. Herbert Wigwe, said “This growth transaction being implemented in Kenya represents the relentless focus and execution of our strategic objectives within our banking subsidiary even as we grow the other businesses within Access Corporation’s core segments. The acquisition of Sidian is a significant step-up in scale and potential for Access Bank in Kenya which represents the largest market and trade corridor in East Africa.

“The significant increase in scale and customer base presents us with enormous opportunities to support growth in the various ecosystems we are building in our trade and payment business.

“The economies of scale that derive therefrom will continue to drive and enhance contributions to all stakeholders.”

Also commenting on the transactions was Mr. Roosevelt Ogbonna, the Chief Executive Officer of Access bank. Ogbona explained that the acquisition will strengthen the bank’s presence in Kenya and support geographic earnings growth and diversification.

He said “this transaction builds on our earlier acquisition of the former Transnational Bank Plc (now Access Bank Kenya) and underscores our resolve to strengthen our presence in Kenya, a ley African market that fits into our strategic focus for geographic earnings growth and diversification.

“The acquisition and intended subsequent merger will create a strong and competitive balance sheet for Access Bank in Kenya, positioning us to be well-placed to promote regional trade finance and other cross border banking services in the East African Community (“EAC”) and broader COMESA region.

“The proposed combination with Access Bank Kenya would undoubtedly propel Access Bank into a strong contender in the Kenyan market with enhanced capacity to play a more impactful role in the growth of its economy while delivering increased profitability for our shareholders.”

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Merger and Acquisition

Access Holdings Plc to Acquire Majority Stake in First Guarantee Pension Limited

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Access Holdings Plc has agreed with First Guarantee Pension Limited to acquire a majority stake in the company in its drive to transform from a narrow banking business into a financial service company.

The leading financial institution stated in a press release obtained by Investors King on Thursday.

According to Access Bank, the transaction is in line with its strategy to evolve into a full-blown financial services company and gain relevant market share across Africa, global monetary centres and beyond banking verticals.

Speaking on the firm’s push to change the banking landscape, Dr. Herbert Wigwe, Group Chief Executive Officer, Access Corporation said “This transaction is a natural evolution for us. Over the last 20 years, we set our sights on and delivered ambitious plans to transform the African financial services landscape focusing on banking and have created the African leading Bank and largest bank by customer base.

“This large customer base both on the wholesale and retail segments makes the pension business a natural fit for the Corporation given its objective of ecosystem optimisation. We will leverage our well-established culture of strong corporate governance, risk management, cutting-edge technology, and digital capabilities to deliver high standards of professionalism in the management of pension assets to the benefit of our stakeholders.”

The firm added that the National Pension Commission and the Central Bank of Nigeria have given their no objection to the transaction.

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