(Bloomberg) — PayPal Holdings Inc. is exploring a $45 billion acquisition of social media company Pinterest Inc., in what could be the biggest technology deal of the year and move the payments company closer to its ambitions of becoming a “super app.”
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 $70 a share, the people said.
That would value Pinterest at about $45 billion 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 $4 billion 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 $45 billion, 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 $304 billion.
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 $10 billion. Its shares closed up 13% at $62.68, giving the company a market valuation of $40 billion.
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.
Super App
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 favorably. “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.
What Bloomberg Intelligence Says:“If PayPal does buy Pinterest, the fintech gains a social media presence rivaling Instagram, bringing in highly engaged consumers and helping merchants sell products. PayPal has much to gain: Pinterest has 380 million monthly active users who use the app 37 times a month, compared with 80 million PayPal users who are active 8-9 times a month.”– Julie Chariell, BI senior fintech industry analystClick here to read the research.
PayPal’s appetite for acquisitions has been increasing in the past few years as it snapped up competitors and moved into new markets. It purchased European small-business commerce platform iZettle in 2018 as part of a bid to better challenge Square Inc.
It then agreed to buy Honey, gaining access to valuable data on consumer buying habits, and in September agreed to acquire Japanese startup Paidy Inc. for 300 billion yen ($2.6 billion) to deepen its push into “buy now, pay later” offerings.
(Updates with additional background, analysis throughout.)
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