Zip to acquire US BNPL for $491m

The transaction, which is subject to regulatory approval and currently expected to be completed by the end of the September 2022 quarter, is said to offer Zip shareholders approximately 78 per cent of the combined group.

Zip has valued the deal at Sezzle’s implied value of $491 million. 

Further, Zip has confirmed that it will be undertaking an equity raising via a full underwritten institutional placement of almost $150 million, and a non-underwritten Share Purchase Plan to existing shareholders in Australia and New Zealand to raise up to $50 million. 

Since its founding in 2016, Sezzle, which offers both short and long BNPL (buy now, pay later) duration as well as credit building, has established a base of 3.4 million active customers and more than 47,000 active merchants with large key businesses across the US and Canada. 

As of 31 December 2021, the US BNPL company had a total transaction volume of US$2.3 billion (roughly $4.13 billion).

The integration is currently set to establish a pro forma active customer base of 13.3 million and almost 130,000 merchants, with 8.8 million customers and 60,500 merchants based in the US.

Zip has said that the deal will also establish positive earnings before taxes, depreciation and amortisation by the 2024 financial year.

During the September 2021 quarter, Zip saw its transaction volume fall by 13 per cent from the previous quarter.

However, the deal also appears to be part of a greater opportunistic strategy for Zip to become a significant player in the US BNPL market, with the ASX-listed group stating the deal will allow it to establish 60 per cent of its total transaction volume ($10.4 billion) in the US.

In 2020, Zip acquired the US-based Quadpay, which rebranded to Zip last year. 

Further, the company has claimed that the US BNPL market is currently valued at $5.5 trillion, as well as $25 trillion globally, but that BNPL’s ecommerce penetration in the US is expected to triple by 2024.

Commenting on the merger, Zip co-founder and global chief executive officer Larry Diamond said it is expected to deliver immediate scale, enhanced growth, and support its path to profitability, particularly in the US. 

“Combining with Sezzle positions us as a leading global BNPL provider and priortises our ability to win in the important US market,” Mr Diamond added. 

Sezzle co-founder, executive chairman and CEO Charlie Youakim commented that the company is “extremely excited about the opportunity to create a leader in the financial services industry”, adding that he believes it is a “great cultural fit” for both companies. 

“I believe the transaction will position us to win in the US and globally.” 

[Related: Zip Business reports annual growth boom]