Xero says the new deal would be a significant change for the company. File photo. Photo: RNZ
- Wellington based Xero to buy US accounting firm Melio for US$2.5 billion
- Acquisition aims to significantly lift Xero share of US market
- Complex funding involves new share issue, debt, cash
Accounting software giant Xero - based in Wellington but listed in Australia - is to buy an American payments platform operator Melio for US$2.5 billion (NZ$4.1b), as it looks to expand earnings in the United States.
The deal will combine Xero's accounting software with Melio's payments platform in the key small and medium business market.
Xero chief executive Sukhinder Singh Cassidy said the deal would be a significant change for the company.
"Xero and Melio are highly complementary - together they complete the key jobs to be done for US SMBs (small medium businesses), extend reach across customer segments, provide both direct and syndicated offerings, and deliver multiple revenue drivers."
She said the deal would double Xero's 2025 financial sales by 2028.
The company earns the bulk of its earnings through sales in Australia and New Zealand, but has been challenged in trying to grow its US earnings.
The acquisition is being funded by a sale of 10.5m new shares to big investors at A$176 each, a 9 percent discount to Xero's last traded price. That will raise about half of the purchase price, while existing Xero shareholders will be offered a total of A$200m worth of shares at a discounted price.
Xero is also issuing shares to current Melio shareholders, as well as using some cash reserves, to be supplemented by some borrowing.
Xero was the flag bearer for New Zealand's technology sector when it listed on the NZX in 2007, but switched to a single listing on the Australian stock exchange in 2018, although it has maintained its nominal head office Wellington.
It shed hundreds of jobs in a restructuring in 2023.
- RNZ
