PayPal and global investment firm KKR has recently announced a multi-year exclusive partnership that aims to address the growing demand for "pay later" services in Europe. Under this agreement, KKR will acquire up to $43.47 billion in existing and prospective European PayPal Pay Later loans. This move is set to bolster PayPal's capital position and enable it to allocate more resources to key projects.
The concept of making purchases in multiple installments has existed for many years, but the popularity of Buy Now, Pay Later (BNPL) services has skyrocketed in recent times. PayPal has been at the forefront of providing consumer finance options online since 2008, and its BNPL offerings have gained significant traction.
In fact, more than 30 million customers across eight markets worldwide have availed themselves of PayPal's Pay Later services since the launch of its first BNPL service in 2020. Notably, PayPal processed over $20 billion in BNPL payment volume globally in 2022, witnessing a remarkable increase of nearly 160% compared to the previous year.
Gabrielle Rabinovitch, Senior Vice President and Acting Chief Financial Officer of PayPal, further emphasized the positive impact of BNPL on PayPal's checkout experience. She stated that BNPL has not only contributed to increased engagement and payment volume growth but has also attracted high-value customers to their merchants. Rabinovitch added that the partnership with KKR would enable PayPal to swiftly meet the rising demand for PayPal Pay Later in Europe while retaining capital for other strategic endeavors.
KKR's involvement in the deal brings its private credit funds and accounts to the forefront. The company's Global Head of Private Credit, Dan Pietrzak, highlighted the strength and maturity of KKR's Asset-Based Finance business, underscoring the exclusive collaboration with PayPal as evidence of their capabilities.
KKR is eager to expand its partnership with PayPal and cater to the financial needs of customers across Europe. Vaibhav Piplapure, Managing Director at KKR, expressed excitement about broadening their footprint in consumer finance and engaging with one of the market leaders in this domain. He believes that PayPal Pay Later provides a differentiated experience, positioning PayPal favorably to capture additional market share in the growing BNPL market.
The anticipated deal is slated to close in the latter half of 2023, subject to customary closing conditions. Upon completion, PayPal expects to utilize the initial proceeds of approximately $1.8 billion to increase capital return to shareholders and support general company objectives.
KKR Capital Markets played a pivotal role in organizing and structuring the debt for this deal. Freshfields Bruckhaus Deringer LLP, Pérez-Llorca, and Allen & Overy Luxembourg served as PayPal's legal counsel, while Morgan Stanley & Co. LLC provided financial and structural advisory services. Furthermore, Latham & Watkins LLP served as legal representatives for KKR.
This strategic collaboration will enable PayPal to strengthen its capital position and continue its focus on delivering innovative payment solutions while KKR expands its presence in the consumer finance sector. The successful completion of this transaction will pave the way for enhanced shareholder returns and facilitate PayPal's sustained growth in the competitive European market.
