Visa Inc., the world's biggest payments network, agreed to buy CyberSource Corp. for about $2 billion in cash to expand online and defend its market share from electronic-commerce firms such as EBay Inc.'s PayPal.
Visa will pay $26 a share for Mountain View, Calif.- based CyberSource, which helps merchants accept online payments and provides security solutions, the companies said Wednesday. That's about 34% more than CyberSource's closing price Tuesday.
"We're paying attention to PayPal, as well as other companies getting into the e-commerce space, and we are obviously concerned that it would have an effect on our market share," Chief Executive Joseph W. Saunders said.
Visa will gain access to about 295,000 CyberSource merchants, including Google Inc., Facebook Inc. and Home Depot Inc. Visa is growing as consumers shift from cash and checks to electronic payments. The San Francisco company's share of global purchase transactions rose to 64.79% last year from 64.09% in 2008, according to the Nilson Report, an industry newsletter. No. 2 MasterCard Inc.'s market share fell to 26.5%.
"This deal should enable Visa to not only expand its leading market share in U.S. e-commerce, but also help it develop markets outside the U.S., where fraud, trust, etc. can stymie growth," Morgan Stanley analyst Adam Frisch wrote in a note to clients.
CyberSource provides fraud-management tools and assists merchants with riskier transactions in which credit cards aren't present, including those conducted over the Internet or telephone. The company helped customers accept $120 billion in online payments last year.
"That's about 1 of every 4 dollars spent online in the United States," said CyberSource CEO Michael Walsh, who will continue to oversee operations after the acquisition is completed. The companies expect that to happen in Visa's fiscal fourth quarter, which ends Sept. 30.
PayPal may have 12% to 14% of the global e-commerce market by next year, according to Patricia Hewitt of Mercator Advisory Group. Visa has said that its share is about 47%. The worldwide market may exceed $500 billion this year, analyst Frisch said.
Visa shares fell 92 cents, or less than 1%, to $93.13. CyberSource shares climbed $6.28, or 32%, to $25.72.