BNPL business, Zip, is acquiring competitor Sezzle in a $491 million deal as the business plans to gear up for US growth.
Sezzle shareholders will receive 0.98 Zip shares for each Sezzle share. Current Zip shares are valued at $2.21, implying a premium of 22 percent per Sezzle share. As such, the deal is valued at $491 million.
This all-scrip merger aims to accelerate Zip’s growth in the US market and achieve faster profitability. The transaction is expected to be finalised in the July quarter.
Sezzle was founded by Charlie Youakim and Paul Paradis in 2016 and is headquartered in Minneapolis. The business focuses its efforts on American SMEs, and currently has more than 7.8 million customers and serves 40,000 merchants. The business is also B-Corp certified, and has the aim to ‘financially empower the next generation’.
This acquisition will “deliver immediate scale and enhanced growth,” said Larry Diamond, Co-Founder and CEO of Zip.
Zip reported revenue of $302.2 million for the first half of FY22, up 89 percent YoY to $302.2 million, but gross profits were down 23 percent to $59.1 million. As such, the cost of sales are up 192.5 percent to $242.2 million and there was a loss before tax of $214.2 million. Its transaction volumes are up 92 percent on pcp to $4.5 billion, with transaction numbers up 147 percent to 36.3 million.
There is potential synergy between the two businesses. Together, they would have combined EBITDA of roughly $130 million in FY24 and will reach 8.8 million customers and 60,500 merchants.
“We are delighted to be bringing Zip and Sezzle together under a transformational transaction that is expected to deliver immediate scale and enhanced growth, which will support our path to profitability,” said Diamond. “Combining with Sezzle positions us as a leading global BNPL provider and prioritises our ability to win in the important US market.”
“Pete and I have known Charlie and Paul for some time, and we’ve been impressed by what the Sezzle team has achieved,” Diamond continued. “Their responsible lending, their Sezzle Up credit builder programme, as well as their B Corp certification is to be admired. We’re excited to welcome the entire Sezzle team on our journey, as we continue our mission towards being the first payment choice, everywhere and every day.”
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