Zip Co to acquire “Buy Now, Pay Later” provider QuadPay

Maria Nikolova

The acquisition implies an enterprise value of approximately US$269 million for QuadPay.

A day after ASX placed the securities of digital retail finance and payments services provider Zip Co Ltd (ASX:Z1P) in trading halt at the request of the company, Zip announces that it has entered into an agreement to acquire the remaining shares in the New York based “Buy Now, Pay Later” (BNPL) provider QuadPay Inc. for scrip consideration.

QuadPay stockholders will be entitled to receive up to a maximum of approximately 119m fully paid ordinary shares of Zip, equivalent to 23.3% of the issued share capital of Zip at completion. The QuadPay Acquisition implies an enterprise value of approximately US$269 million (or AU$403m) for QuadPay and is accretive for Zip on both a total transactions volume and revenue basis.

The deal is set to give Zip access to the world’s largest retail market – QuadPay is one of the leading BNPL platforms in the US, the world’s largest retail market during a time when interest-free instalments are transforming the way people pay.

Once the acquisition is completed, the combined group will have operations across the world in five countries (AU, NZ, US, UK and SA) with combined annualised TTV of AU$3 billion, annualised revenue of AU$250 million, 3.5 million customers and 26,200 merchants.

As the largest stockholder of QuadPay other than its co-founders, Zip is already highly familiar with the QuadPay management team and business.

QuadPay’s team is New York headquartered and led by co-founders and joint CEOs Adam Ezra and Brad Lindenberg, who will join the Zip global leadership team, with ultimate responsibility for scaling the US business. Retention and performance equity has been offered, linked to aggressive growth targets.

Also today, Zip announces that it has entered into an agreement with CVI Investments, Inc., an affiliate of Heights Capital Management, which is an affiliate of the US-based Susquehanna International Group (SIG) to raise up to AU$200 million by way of the issue of convertible notes and the exercise of warrants. The convertible notes have an initial conversion price of AU$5.53287, a 50% premium to the 1-day volume weighted average price (VWAP) of Zip’s Shares on 29 May 2020, while the warrants have an initial exercise price of AU$5.1639, a premium of 40% to such VWAP.

SIG is one of the world’s largest privately-held financial services firms with over 2,000 employees in six countries. Founded in 1996, Heights Capital Management (Heights) invests SIG’s internal capital through direct investments in listed companies in the U.S., Europe, and Asia. Heights has supported many leading companies and manages a diverse investment portfolio of high-growth small to medium-sized companies. SIG has also made investments in Bytedance (parent company of Tik Tok), Credit Karma and Fundera.

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