Zip Co Limited (ASX:Z1P) and Sezzle Inc. (ASX:SZL) have entered into a definitive agreement under which Zip has agreed to acquire Sezzle in an all-scrip transaction by way of a statutory merger under the laws of the State of Delaware.

Subject to the satisfaction or waiver of specified closing conditions, Sezzle stockholders will be entitled to receive 0.98 Zip ordinary shares for every share of Sezzle common stock owned. The total consideration for the Sezzle shares in the Proposed Transaction represents an implied value of Sezzle of approximately A$491 million (based on the trading price of Zip ordinary shares on the Australian Securities Exchange (“ASX”) as of the close at 25 February 2022).

The Proposed Transaction values Sezzle at a 22.0% premium based on current spot prices of A$1.78 (Sezzle) and A$2.21 (Zip) as of 25 February 2022, and a 31.7% premium based on a 30-day volume weighted average price (VWAP) of Sezzle’s common stock on the ASX.

Upon implementation of the Proposed Transaction and the Placement, Zip shareholders will own approximately 78% of the combined group and Sezzle stockholders will own approximately the remaining 22%. Closing of the Proposed Transaction is expected to occur by the end of the third quarter of CY2022.

Zip also announces a A$148.7 million fully underwritten placement to eligible institutional, professional and sophisticated investors, and a non-underwritten share purchase plan to eligible Zip shareholders in Australia and New Zealand to raise up to A$50 million. Proceeds of the Placement and SPP will help Zip strengthen its balance sheet and positions Zip for sustainable growth by providing more capital runway to execute on the potential synergies from the Proposed Transaction.

“We are delighted to be bringing Zip and Sezzle together under a transformational transaction that is expected to deliver immediate scale and enhanced growth, which will support our path to profitability. Combining with Sezzle positions us as a leading global BNPL provider and prioritises our ability to win in the important U.S. market,” said Larry Diamond, Co-Founder and Global CEO of Zip.

“We are extremely excited about the opportunity to create a leader in the financial services industry by combining with Zip and its management team led by Larry and Pete. Paul and I believe it will be a great cultural fit for both our organisations and we’re excited to be part of Zip’s next chapter,” stated Charlie Youakim, Co-founder, Executive Chairman, and CEO of Sezzle. “I believe the transaction will position us to win in the U.S. and globally.”

In order to ensure alignment on delivery of the combined company strategy, as part of the Proposed Transaction Zip will expand the Zip board of directors to nine members, comprising three persons appointed by Sezzle (being, Co-Founder & CEO of Sezzle, Charlie Youakim as an Executive Director, Paul Lahiff and Mike Cutter as Non-Executive Directors), and an independent director mutually agreed between Zip and Sezzle. Diane Smith-Gander will remain the Independent Chairperson of Zip. Upon closing, Charlie Youakim will become President and CEO of the Americas (U.S., Mexico and Canada) and Executive Director & President of Sezzle, Paul Paradis will join the U.S. leadership team.

The Zip board of directors has unanimously determined that the Proposed Transaction is in the best interests of Zip and its shareholders and recommends that Zip shareholders vote in favour of the resolutions necessary to implement the Proposed Transaction.

Subject to the receipt of the requisite Zip and Sezzle securityholder approvals, and the satisfaction or waiver of the other conditions to closing, Zip expects to complete the Proposed Transaction by the end of the third quarter of CY2022.