Australia’s Zip to acquire fintech rival QuadPay to tap US market

Photo: Zip website

Australian buy-now-pay-later (BNPL) company Zip Co Ltd said it will buy New York rival QuadPay Inc in an all-share deal that values the target at $269 million, joining a rush of Australian companies to tap the world’s largest consumer market.

The move pits Zip against larger Australian BNPL provider Afterpay Ltd, and others, in the U.S. consumer finance market which has boomed as younger shoppers seek low documentation alternatives to interest-charging credit cards.

Under the elaborately-structured deal, Zip said it will give 119 million of its shares, or just under a quarter of the company, to owners of unlisted QuadPay for the 86% of the target it does not already own.

Zip would issue the shares partly by giving a stake of itself to U.S. private equity firm Susquehanna International Group, in exchange for $200 million worth of derivative securities.

The derivatives valued Zip shares at a hefty premium to their most recent close, and shares of the Australian company jumped 39% on Tuesday to be in line with the implied price of the private equity firm’s stake.

“The funding structure is very complicated, however at face value it provides flexibility and upside for both ZIP and (Susquehanna), incentivises and locks in management, and funds further growth in the QuadPay business,” said RBC Capital Markets analyst Tim Piper in a client note.

Zip CEO Larry Diamond said in a statement that the U.S. was “a critical part of our global strategy and vital as merchants increasingly look for a global payments solution”.

QuadPay co-CEOs Adam Ezra and Brad Lindenberg said in a joint statement that “by combining Zip‘s resources, geographic coverage, data capabilities, category leadership and experience, we look forward to driving strong growth together in North America and across core markets”.

The combined company would have about 3.5 million customers and more than 26,000 merchants, with annual revenue of over A$250 million, Zip said, closing on Afterpay which claims about five million customers.

Chinese internet giant Tencent Holdings Ltd recently bought 5% stake of Afterpay, propelling its shares higher, months after Ant Financial, an affiliate of Alibaba Group Holding Ltd, bought a stake of Swedish BNPL company Klarna Bank AB – which already counts Commonwealth Bank of Australia and rapper Snoop Dogg as backers.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.