Sezzle Calls Off $356M Merger Deal
Anyone paying attention to Elon Musk’s bid for Twitter knows: Acquisitions do not always go as planned. That’s now holding true for Minneapolis-based fintech firm Sezzle Inc., which has called off its merger agreement with an Australian rival company.
On Tuesday, Sezzle announced that it has canceled its plan to merge with Zip Co. Ltd., another “buy now, pay later” company. The deal would have seen Zip purchase Sezzle for $356 million. But Sezzle will still walk away with $11 million to cover legal costs, accounting, and other expenses incurred while planning the failed transaction.
The announcement came just months after Sezzle and Zip formally laid out plans to merge. It’s not entirely clear why the two have canceled the transaction. In a short press release issued Tuesday, Sezzle co-founder and CEO Charlie Youakim simply said that “we remain dedicated to driving toward profitability and free cash flow and believe this is the best outcome for our shareholders.”
“While we were excited by the potential of this transaction, our board and management team are laser-focused on our strategy and execution,” he said in the release.
Zip leaders, meanwhile, believe that canceling the deal will enable their company “to focus on its strategy and core business in the current environment.”
“We believe that mutually terminating the merger agreement with Sezzle at this time is in the best interests of Zip and its shareholders,” said Zip board chair Diane Smith-Gander in a statement.
Shortly after Sezzle announced plans the merger plans earlier this year, the company said it planned to trim its North American workforce by 20 percent. At the time, Sezzle leaders again said they were working toward “profitability and free cash flow.”
Sezzle and Zip both offer a service that enables consumers to make purchases instantly and then pay them off over time. It’s similar to a credit card, but the process isn’t reported to credit bureaus and does not affect users’ credit scores. The companies have said that their services open up more payment options for individuals without a credit history, or with a poor credit score. Sezzle’s stated goal has been to “financially empower the next generation.”
Other big names in the space include Klarna, Afterpay, and Affirm.
As of Dec. 31, 2021, Sezzle offered its services at nearly 47,000 merchants. That includes Target Corp., which signed a three-year contract with the fintech company in June 2021. Sezzle is based in Minneapolis but is publicly traded in Australia. As of Wednesday morning, Sezzle’s stock was trading at just 20 Australian cents a share.
The “buy now, pay later” market grew significantly during the pandemic, though it remains to be seen whether consumers will continue using the services amid fears of an economic recession. Still, one financial analyst with Morning Consult said that such purchases will “remain steady even as consumers’ purchasing power and outlook on the economy deteriorate.”