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Xero Ltd (ASX:XRO) is in the final stages of buying 100% of U.S. bill pay platform Melio, today signing a binding agreement to pick up the New York-headquartered fintech firm for as much as $3.9 billion in cash and scrip.
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“We’re thrilled to announce we’re acquiring Melio, a leading, high-growth U.S. payments platform that strongly aligns with our 3×3 strategy,” Xero chief executive Sukhinder Singh Cassidy told shareholders today.
The deal makes sense in the company’s view because Xero and Melio are so “highly complementary” in what they do, including everything in the U.S. SMB pipeline as well as when it comes to extending reach across customer segments, providing direct and syndicated offerings, and building revenue.
The move directly feeds into Xero’s “U.S. growth ambitions,” Ms Cassidy continued, and now enables Xero to make a “step-change in our North America scale.”
Expectations are this Melio acquisition will immediately triple Xero’s North American revenue and the average revenue per user. Melio already has 80,000 customers on the books who made $30B in payments last year.
Through the financial year ending March 31, the U.S. bill pay platform raked in as much as US$153 million in revenue; one major reason it caught Xero’s eye.
When the buy-up happens, Xero is keeping Melio boss Matan Bar on in the U.S.
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As for how Xero is paying the whopping $4 billion bill, HotCopper understands large chunks will be paid through a credit facility – up to $400M – and as much as $860M handed out to Melio employees through share plans.
The company already had US$600M in its coffers too, which goes straight to the deal.
XRO shares were last at $194.21 before a pre-release trading halt.
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