The deal between Synchrony and PayPal is officially closed, with Synchrony acquiring $7.6 billion in receivables. The deal, first announced in November 2017, includes PayPal’s U.S. consumer credit portfolio, worth $6.8 billion. It also includes approximately $.08 billion in participation interests held by unaffiliated third parties.
PayPal and Synchrony have been partners since 2004 when they first offered PayPal-branded credit cards that could be used online and in stores. They expanded their credit card program agreement through 2028 which involves PayPal Extras Mastercard and the PayPal Cashback Mastercard. Synchrony will now be the exclusive issuer of PayPal Credit consumer financing program in the US through 2028.
This sale means that PayPal will lose the interest the loans could generate. However, the company’s new strategy is to free up billions of dollars in cash in order to grow the business in other ways that could get higher returns.
“We’re pleased that we’ve completed the sale of our U.S. consumer credit receivables portfolio,” said the president and CEO of PayPal, Dan Schulman, in a statement. “Our agreement with Synchrony accomplishes every goal we set out for our asset light strategy. We look forward to working with Synchrony to double down on our innovative consumer credit experiences for our customers and profitably grow the portfolio over time.”
PayPal received about $6.8 billion at the time of the deal closing. Both stocks went up, with PayPal up .07% and Synchrony up .06%
“This collaboration plays to both companies’ strengths in providing seamless digital payments and innovating for partners, merchants and consumers,” said Synchrony President and CEO Margaret Keane. “Together we can provide an enhanced customer experience for thousands of merchants and consumers.”