SYDNEY: Australian buy-now-pay-later (BNPL) company Zip Co Ltd said it will buy New York rival QuadPay Inc in an all-share deal that values the target at US$269mil, joining a rush of Australian companies to tap the world’s largest consumer market.
The move pits Zip against larger Australian BNPL provider Afterpay Ltd, and others, in the US consumer finance market which has boomed as younger shoppers seek low documentation alternatives to interest-charging credit cards.
Under the elaborately-structured deal, Zip said it would give 119 million of its shares, or just under a quarter of the company, to owners of unlisted QuadPay for the 86% of the target it did not already own.
Zip would issue the shares partly by giving a stake of itself to US private equity firm Susquehanna International Group, in exchange for US$200mil worth of derivative securities.
The derivatives valued Zip shares at a hefty premium to their most recent close, and shares of the Australian company jumped 39% yesterday to be in line with the implied price of the private equity firm’s stake.
“The funding structure is very complicated, however at face value it provides flexibility and upside for both ZIP and (Susquehanna), incentivises and locks in management, and funds further growth in the QuadPay business, ” said RBC Capital Markets analyst Tim Piper in a client note.
Zip CEO Larry Diamond said in a statement that the US was “a critical part of our global strategy and vital as merchants increasingly look for a global payments solution”.
QuadPay co-CEOs Adam Ezra and Brad Lindenberg said in a joint statement that “by combining Zip’s resources, geographic coverage, data capabilities, category leadership and experience, we look forward to driving strong growth together in North America and across core markets”.
The combined company would have about 3.5 million customers and more than 26,000 merchants, with annual revenue of over A$250miln, Zip said, closing on Afterpay which claims about five million customers.
Tencent Holdings Ltd recently bought 5% stake of Afterpay, propelling its shares higher, months after Ant Financial, an affiliate of Alibaba Group, bought a stake of Swedish BNPL company Klarna Bank AB. — Reuters
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