PayPal is acquiring digital money transfer service Xoom for roughly $890 million. PayPal is paying $25 per share, about a 32% premium Xoom's 3 month weighted average price.

Xoom's shares are up more than 20% in after hours.

Xoom allows users to send money online or through mobile devices around the world. Last year, it had about $159 million in sales. At today's closing, Xoom had a market cap of around $800 million.

Through this deal, PayPal says it will be able to expand on its 68 million active US customers. Xoom says it had more than 1.3 million active customers making money transactions worth approximately $7 billion last year.

Xoom will remain a standalone service even after the acquisition.



"Acquiring Xoom allows PayPal to offer a broader range of services to our global customer base, increase customer engagement and enter an important and growing adjacent marketplace. Xoom’s presence in 37 countries – in particular, Mexico, India, the Philippines, China and Brazil – will help us accelerate our expansion in these important markets," Dan Schulman, President of PayPal, said in a statement.

PayPal, a payments service eBay acquired for $1.5 billion in 2002, is in the process of spinning off as a standalone company. It is expected to become an independent company traded on NASDAQ by July 17.