The Wellington-based accounting software giant, Xero, has announced it will acquire American payments platform operator Melio for an upfront sum of US$2.5 billion (NZ$4.1 billion).
The acquisition is designed to create a unified platform that combines Xero’s accounting capabilities with Melio’s digital bill payment solutions, addressing a critical need for small and medium-sized businesses (SMBs) to integrate accounting and payments.
“Adding Melio’s world-class team, technology platform and innovative A/P solutions to Xero enables a step change in our North America scale and the potential to help millions of U.S. SMBs and their accountants better manage their cash flow and accounting on one platform,” Xero chief executive Sukhinder Singh Cassidy said in a statement.
“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.”
Cassidy said the deal is expected to double Xero’s financial sales by the year 2028.
The acquisition is financed partly through the sale of 10.5 million new shares to major investors at A$176 each, representing a 9% discount to Xero’s most recent trading price. This share sale is expected to cover approximately half of the purchase cost.
Additionally, existing Xero shareholders will have the opportunity to acquire shares worth a total of A$200 million at a discounted rate.
Xero is also allocating shares to existing Melio shareholders and using some of its cash reserves, with additional funding to be secured through borrowing.