Zip, Australia’s largest buy now, pay later company, has acquired one of its biggest competitors for AUD491 million (US$355 million) as it accelerates its push into the US to acquire Jack Dorsey’s Square payments platform .
Zip, which competes with Afterpay and Klarna, will acquire Sezzle in an all-share deal that will give the combined company a customer base of 13 million.
The company will raise A$200m through a discounted share placement to fund the deal, which should help it expand its presence in the US by adding major retailers like Ikea and Target to its platform.
Australia’s buy-now, pay-later market has boomed in recent years as dozens of brands have targeted customers looking for tiered payments.
Square AUD39 billion Acquisition of Afterpay last year – the biggest takeover in Australian history – signaled that global technology companies are looking to enter the market.
But the value of BNPL companies have collapsed since the deal closed as investors question the high cash burn and bad debts across the sector.
Zip, Australia’s largest listed company in the industry after acquiring Afterpay, has lost 80 percent of its value over the past 12 months.
Larry Diamond, Zip’s founder and CEO, said the company will be cash flow positive and earnings by the end of fiscal 2024 as it “refines” its investments and promises to cut losses.
He acknowledged that companies would need to demonstrate that they could achieve financial goals. “The market won’t give us that luxury,” he said.
Diamond said the Sezzle deal would strengthen Zip’s position in the US, where BNPL accounts for just 2 percent of transactions, significantly less than in Australia.
“We’re right in the middle,” he said, citing the combined company’s 125,000 retail partners — including Amazon, Facebook and Microsoft — as an example of its strong position in North America.
Usage of BNPL services has grown rapidly in Australia, particularly among younger customers using the app-based system, which is not regulated like credit cards.
Regulators in the UK have taken a tougher line against the services, with the Financial Conduct Authority saying “very urgent” Intervention on Consumer Risks.
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Australia’s biggest ‘buy now, pay later’ company buys rival to drive US push Source link Australia’s biggest ‘buy now, pay later’ company buys rival to drive US push