IZettle finalized its deal to be bought by PayPal Holdings Inc. for $2.2 billion the evening before the Swedish fintech start-up was set to price its shares in an initial public offering.

It looked like an abrupt about-face for the company, which competes with Square Inc. and Canada’s Shopify Inc. On May 8 it announced it was seeking to raise about $225 million in an initial public offering to be completed this year. Yet just days later, it has been bought by a U.S. competitor.

Square shares fell as much as 3% as the market opened Friday but soon were back in positive territory; they ended the day up 0.4% at $55.04. Paypal shares climbed 2% to $80.79.

The decision from iZettle comes a little more than a month after Spotify became arguably Europe’s largest start-up to refuse to sell to a U.S. or Asian investor, listing on the New York Stock Exchange for about $27 billion.


“IZettle’s goal was to go for an IPO. There was no real dual track,” said Johan Brenner, general partner at Creandum, an investor in iZettle. “The PayPal discussion became concrete extremely late and was only a done deal late last night.”

IZettle had been planning to price shares for its IPO on Friday, according to a person with direct knowledge of the deal who did not want to be named discussing a private negotiation. PayPal made a last-minute approach, the person said, adding that there was no sale process or auction.

IZettle Chief Executive Jacob de Geer said May 8 that the company was “fully focused” on the IPO plan announced that morning.

In an interview Thursday, De Geer said he changed his mind after meeting with the executive team at PayPal. He was convinced that his company could continue to grow substantially under the new owner and that their cultures would be aligned.


IZettle has been previously open to a sale as an alternative to an initial public offering, Bloomberg reported in December.

JPMorgan Chase & Co. was the sole financial advisor to iZettle. PayPal worked with Evercore Inc.

The $2.2 billion that PayPal is putting up for iZettle is the San Jose company’s biggest deal.

Founded in 2010 by De Geer and Magnus Nilsson, iZettle started out with a mobile-phone gadget for accepting credit card payments. It has since expanded into software and financing services to support small businesses. The company operates in 12 markets in Europe and Latin America and was valued at about $500 million in January 2017.


PayPal suffered a blow in February when longtime partner EBay Inc. decided to shift its payments business to Adyen, a global payments company based in the Netherlands. Adyen is said to be considering an IPO this year.

“The acquisition of iZettle confirms a PayPal strategy of further expansion into the physical payments market in a bid to not only better compete, but to also remain relevant,” said Phil Sealy, principal analyst at ABI Research.

Sealy said PayPal’s huge presence within the online payments market isn’t mirrored among small and medium businesses — a market now dominated by fast-growing players including iZettle and Square.

“It’s an area it’s not as well known for,” he said. “The acquisition will provide PayPal an increased foothold in the European proximity payments market.”


De Geer will continue to lead the business, and the company will maintain its Stockholm headquarters — an office in the center of the city and in the heart of the banking and shopping district.

Lanxon and McLaughlin write for Bloomberg.

UPDATES:

2:20 p.m.: This article was updated with stocks’ closing prices.


This article was originally published at 7:25 a.m.