PayPal’s $2.2 billion acquisition of Swedish card terminal startup iZettle makes perfect sense — and Square should be worried (PYPL, SQ)

LONDON — PayPal surprised many industry observers with a $2.2 billion deal to buy eight-year-old Swedish card terminal company iZettle.

The deal is PayPal’s biggest ever acquisition and comes less than two weeks after iZettle announced plans to go public. The Financial Times reported at the time that iZettle could seek a valuation of $1.1 billion in an IPO, suggesting a huge premium on PayPal’s offer. The sale price is just over 20x iZettle’s 2017 revenues and the company is loss making.

Mizuho Securities analyst Thomas McCrohan said in a note to clients on Friday: “We do not believe this was the acquisition shareholders were anticipating [and] the price paid appears expensive.”

PayPal CEO Dan Schulman.

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