The Australian company’s acquisition of Minneapolis fintech Sezzle is off

The sale of Sezzle Inc., a fintech company in Minneapolis, to a competitor has fallen through.

Sezzle and Zip Co., which is based in Australia, announced on Tuesday that they had agreed to close a share transaction that was originally signed in February.

In the months since, the market value of both companies, which offer buy-now-pay-later platforms for retailers and customers, has collapsed.

Investor perceptions deteriorated in their buy-now-pay-later niche as the outlook for recession in the US and other countries created more risk in companies’ customer base. In addition, higher interest rates pushed up the cost of investment capital, which Sezzle and Zip depend on since they do not take deposits.

Under the $ 352 million purchase deal to be finalized this summer, Zip would have owned 78% of Sezzle.

“While we were thrilled with the potential of this transaction, our board and management are laser-focused on our strategy and implementation,” said Charlie Youakim, Sezzle’s CEO, in a statement. “We remain committed to profitability and free cash flow and believe this is the best outcome for our shareholders.”

Sezzle, which started in 2017 and has around 400 employees, was listed on the Australian Stock Exchange in 2019. During a period in 2020 and 2021, investors valued Sezzle at more than $ 1 billion.

Zip will reimburse Sezzle $ 11 million to cover legal and accounting fees and other costs associated with the failed agreement.

Sezzle currently has $ 71 million in cash on hand and on the credit line, not including the $ 11 million repayment from Zip, according to preliminary results for the second quarter.

For the three months ended June 30, Sezzle said they expect a total revenue of between $ 28.5 million and $ 29.5 million, an increase over the same quarter in 2021, when total revenue was $ 27.8 million.

Between $ 415 million and $ 420 million in merchandise sales were made through Sezzle’s platform in the quarter, over $ 411 million made through the platform in the same quarter in 2021.

Sezzle’s shares are currently trading at 26 Australian cents, down from $ 2.85 in January. The company, which has around 400 employees, was listed on the Australian Stock Exchange in 2019.

Zip, meanwhile, reported revenue of $ 159.2 million in the last quarter. As a combined company, Zip and Sezzle were expected to serve more than 60,000 dealers and 8.8 million consumers.

“We believe that the mutual termination of the merger agreement with Sezzle at this time is in the best interests of Zip and its shareholders, and will allow Zip to focus on its strategy and core business in the current environment,” said Diane Smith, Zip’s Chairman of the Board. said in a statement.

Under the previous plan, Youakim would have become president and CEO of Zips’ operations in the United States, Mexico and Canada, and CEO and president of Sezzle.

Sezzle was founded in 2017 and has more than 40,000 retail customers, including Target Corp.