Australia’s Zip Beefs Up in the U.S. Market With a $355.5 Million All-Stock Deal for Sezzle

Australian fintech Zip Co Ltd. is poised to expand its buy now, pay later services through a definitive agreement to acquire Sezzle Inc. in an all-stock deal that values Sezzle at $355.5 million, or 491 million in Australian dollars (AUS). The deal is expected to significantly expand Zip’s presence in the United States, which the company considers a high-priority market. In 2020, Zip acquired Quadpay, a U.S.-based rival, to grow its footprint in the U.S.

Under the terms of the deal, which was unanimously approved by the boards of both companies, Sezzle stockholders will receive 0.98 of a Zip ordinary share for every share of Sezzle common stock owned. As part of the proposed transaction, Zip is also establishing an American Depository Receipts (ADR) program, with the associated Zip ADRs required to be listed on a U.S. exchange as a condition to closing the proposed transaction. 

Sezzle stockholders outside of Australia may elect under the merger agreement to receive 0.98 Zip ADRs for every share of Sezzle common stock owned in lieu of receiving Zip ordinary shares. The deal is expected to close by the end of the third quarter.

The shares issuable to Sezzle stockholders in the proposed deal will represent 22% of the combined group, while shares held immediately before the transaction by Zip shareholders will represent the remaining 78%.

“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,” Zip chief executive and co-founder Larry Diamond says is a prepared statement. “Combining with Sezzle positions us as a leading global BNPL provider and prioritizes our ability to win in the important U.S. market.”

The combined company will have 8.8 million customers and more than 60,000 merchants in the U.S. Once the merger is complete, the combined entity is projected to derive about 60% of its BNPL business from the U.S., up from Zip’s 48% as of year-end 2021.

In addition, the deal is expected to broaden the combined company’s product offerings, which the companies expect will increase customer engagement at checkout and through its app, lower customer acquisition costs, and improve risk management.

“We are extremely excited about the opportunity to create a leader in the financial-services industry by combining with Zip and its management team,” Charlie Youakim, cofounder, executive chairman, and chief executive of Sezzle, says in a prepared statement. “I believe the transaction will position us to win in the U.S. and globally.”