Terms weren't disclosed.
Happy Returns is a drop-off service. It enables online shoppers to return items without having to box and ship the items themselves. The company's network has more than 2,600 dropoff locations spread across every state.
PayPal expects the deal to close in this quarter, according to MarketWatch.
"With PayPal’s support, we will also focus on improving our platform and expanding our footprint," Happy Returns said Thursday.
PayPal's relationship with Happy Returns goes back to at least April 2019 when PayPal invested in the company as part of an $11 million financing round.
“Working with Happy Returns will help us learn more about how returns can decrease the friction in shopping online and how to help merchants address this growing problem," Robert Clarkson, vice president of North America for PayPal, said of the company at the time.
PayPal was praised by analysts following its earnings release last week.
The San Jose, Calif., company reported what it said was the strongest first quarter in its 23-year history, with net income leaping on 31% higher revenue and net new active accounts rising by 14.5 million.
Last month, PayPal’s Venmo unit opened its service to buying, selling and holding cryptocurrency directly within the Venmo app with as little as $1.
Morgan Stanley’s James Faucette rates PayPal overweight and raised his share-price target to $337 from $329.
J.P. Morgan analyst Tien-tsin Huang also rates the stock overweight and lifted his price target to $313 from $310.
Shares of PayPal at last check were 0.7% higher at $241.61.