Software company Xero has announced a US$2.5 billion (A$3.9 billion) acquisition in the United States and an A$1.85 billion (US$1.2 billion) capital raise to partly fund it.
Xero, which provides a cloud-based accounting platform mainly for small and medium-sized businesses (SMBs), said it had entered into a binding agreement to acquire SMB business payment platform operator Melio Limited and its associated entities.
The New Zealand-based company said that the upfront consideration would be funded through a fully underwritten A$1.85 billion institutional placement, about US$360 million of Xero shares issued to Melio shareholders, a fully underwritten US$400 million billion unsecured revolving credit facility and US$600 million of cash.
The placement will be at $176 per share, a 9.4% discount to Xero’s closing price of $194.21 on Tuesday.
Xero will also offer eligible shareholders the opportunity to participate in a non-underwritten share purchase plan (SPP) to raise about A$200 million.
The company said acquiring Melio delivered a step change in Xero’s U.S. value proposition and scale, accelerated its ‘3x3’ strategy and global high growth aspirations, solved a critical customer need and united accounting and payments on one platform for customers.
“We’re thrilled to announce we’re acquiring Melio, a leading, high-growth U.S. B2B payments platform that strongly aligns with our 3x3 strategy and US growth ambitions,” Xero CEO Sukhinder Singh Cassidy said in an ASX announcement.
“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 US SMBs and their accountants better manage their cash flow and accounting on one platform.
“Xero and Melio are highly complementary — together they complete the key jobs to be done for U.S. SMBs, extend reach across customer segments, provide both direct and syndicated offerings, and deliver multiple revenue drivers.”
Melio Co-founder and CEO Matan Bar said joining Xero was an opportunity to further Melio’s mission to reinvent the way businesses pay each other.
“Having worked closely with the Xero team, we’re excited by our shared purpose to scale in the U.S. and combine Xero’s accounting capabilities with Melio’s accounts payable and receivable solutions to create comprehensive product offerings for our collective, valued customer base,” Bar said.
The SPP will be at the lower of the placement price and a 2% discount to the five-day volume weighted average price (VWAP) of Xero shares up to and including the closing date of the SPP, which is scheduled for 21 July 2025).
Xero shares had closed 75 cents (0.39%) higher at $194.21 on Tuesday, capitalising the company at $29.93 billion.
