Zip announced it was looking to buy BNPL rival Sezzle in a $491 million deal that Zip says will help accelerate its path to profitability, as the industry faces tougher conditions and Zip comes under more pressure to become profitable.
Under the deal, Zip will offer 0.98 Zip shares for every Sezzle share, representing a 22% premium on Sezzle’s Friday closing price of $1.78. For reference, Zip closed Friday’s session at $2.21. Zip announced it was raising $148.7 million in new equity to help fund the deal, strengthening the company’s balance sheet whilst executing “potential synergies” from the acquisition. Up to $50 million will also be raised via a non-underwritten share purchase plan adding further capital runway. Post-acquisition, Zip said it expected the joint company to be cash flow and EBITDA positive by FY24.
The deal should enhance Zip’s scale and product offering, with added capabilities to accelerate growth in the US market. The deal will also bring together highly complementary enterprise and SMB merchant networks with a strengthened set of capabilities across a diverse set of verticals.
Zip co-founder and Global CEO, Larry Diamond, said “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. Combining with Sezzle positions us as a leading global BNPL provider and prioritises our ability to win in the important US market.”
The announcement came on the same day Zip released its half-year results for the six months ending December 2021. During the half, revenue grew 89% to $302.2 million, with strong growth also experienced across customer numbers which were up 74% YoY to 9.9 million. Despite this, Zip reported a $214.3 million loss.