Australian BNPL Company Zip Buys US Rival Sezzle For $350M
Zip (ASX: Z1P), an Australian “buy now, pay later (BNPL)” provider, is spreading its wings abroad with the help of an acquisition. The company has agreed to buy Sezzle, a US-based BNPL provider listed on the Australian stock exchange (ASX: SZL).
- Zip will pay A$491mn ($357mn), all with shares to buy Sezzle. The acquisition price represents a 22% premium to Sezzle’s market capitalization before the agreement.
- Alongside the acquisition, Zip also announced a secondary share sale of nearly A$200mn ($145mn) to strengthen its balance sheet and provide capital for growth initiatives.
Zip is a leading BNPL provider in Australia, where it competes with the likes of Klarna and Afterpay. However, it’s a much smaller player than these other two companies. Hence, there’s a pressing need to expand internationally, and the company sees buying Sezzle as the simple way to do that.
Though Sezzle is listed in Australia, it doesn’t do business in the country. Most of its business is in the US, UK, and Canada, and a minority from other countries like France, Germany, Austria, and Italy. Hence, it makes sense that Zip is buying Sezzle to expand its business outside Australia.
Zip entered the US market in 2020 and has seen remarkable success there, with nearly 6 million users and 19 million merchants signed up. It entered by buying QuadPay, a New York-based BNPL provider, in a $300mn deal. Buying Sezzle would give it additional sway in the US markets.
- Zip reported A$398mn ($290mn) in revenue on a A$5.8bn ($4.2bn) transaction volume in its last fiscal year ended June 2021. From June to December 2021, it reported A$294mn ($214mn) in revenue, an 89% increase year-over-year. However, Zip is significantly unprofitable due to expensive growth investments; it posted a net loss of A$214mn ($156mn) from June to December 2021.
- Sezzle made $115mn in revenue in 2021, according to SEC filings. Like Zip, it’s significantly unprofitable; it posted a $49mn net loss in the nine months ended September 2021.
- Zip says buying Sezzle will help fast-track it towards profitability.
Once the acquisition closes, Sezzle’s CEO, Charlie Youakim, will join Zip as the executive in charge of its Nothern American business (US, Canada, and Mexico). He’ll also get a board seat at the Australian BNPL company.
If Zip terminates the acquisition at any time, it’s required to pay Sezzle a breakup fee of A$31mn ($23mn).