He is an overseas buyer and I'm not prepared to use any method other than paypal so will be cancelling his bid.
I'm thinking him of sending a message saying the following.
"Thank you for letting me know before the end of the auction. I shall cancel your bid for you."
Is this enough? If he gets his paypal reinstated and wins the item I don't want him to think I've been shirty with him and leave negative feedback. Is there a protocol for this kind of thing?