Xoom Bidding War? SunTrust Says Western Union, Facebook, Google, Others Could Come Forward

In a report published Friday, SunTrust Robinson Humphrey analyst Robert S. Peck maintained a Neutral rating on eBay Inc EBAY, following an announcement by Paypal, Inc. PYPL of its intention to acquire Xoom Corp XOOM.

In the report SunTrust noted the near-term rationale for the deal as:

1. While Xoom enables online C2C money transfer and bill payment from the US to 37 international markets, PayPal has processing infrastructure and know-how in more than 200 markets. PayPal can thus “extend and accelerate the Xoom footprint.”
2. PayPal has 68m active users in the US to whom it can cross-sell Xoom
3. Complementary TAM of $600b

Referring to the long-term rationale for the deal, analyst Robert Peck said that there were “synergies/opportunity between Xoom and Venmo inside the PayPal ecosystem enabling lower cost (ACH, or debit worse-case) wallet funding (PayPal, Paydiant) and in-market and cross-border C2C and C2B transactions. This could serve to sustain relevance on the consumer side and (interrelated) preserve/lower funding cost and strengthen the value proposition on the merchant side.”

Another SunTrust analyst Andrew Jeffrey believes that other suitors may come forward for Xoom, since its shares were trading modestly above the $25 acquisition price. Jeffrey said the suitors that “could make sense” include:

• The Western Union Company WU (rated Reduce)
• Facebook Inc FB (rated Buy)
• Snapchat
• Google Inc GOOGL (rated Buy)
• Airbnb (wildcard)
• Private equity