Tech stocks drag Aussie shares lower as markets assess Xero's Melio deal
Australian shares slipped on Thursday, pulled down by tech stocks as IT major Xero dropped after announcing a deal to acquire U.S.-Israeli payments provider Melio Payments and a discounted share placement to fund it.
The S&P/ASX 200 index lost 0.1% to 8,553.30 points by 0104 GMT. The benchmark had ended largely unchanged on Wednesday.
Technology stocks on the local bourse dropped 2.7%, led by a 7% decline in accounting software major Xero when it resumed trade on Thursday, a day after announcing it would buy Melio for as much as $3 billion.
The company with A$30 billion ($19.57 billion) market capitalisation asked institutional investors for A$1.85 billion to help pay for the purchase, with the placement representing a 9.4% discount to Tuesday's close.
Xero went on a trading halt before markets opened on Wednesday, pending the announcement of a 'corporate transaction and an associated equity raising'. The deal was announced soon after.
Analysts have given the deal a cautious endorsement.
'Xero's acquisition of Melio… comes with short-term earnings dilution, integration risks and heightened exposure to a competitive and evolving U.S. fintech landscape,' said Mark Gardner, CEO and Head of Equities Advisory at MPC Markets.
Australian shares flat as banks offset mining drag; inflation data eyed
Jefferies reduced its target price for Xero to A$176.90 from A$194.80, citing that Melio would still be '-12% dilutive to earnings on a per-share basis in FY28'.
Bucking the trend, miners gained 0.3% as copper prices rose, supported by a tentative ceasefire between Iran and Israel.
BHP and Rio Tinto added 0.4% and 0.2%, respectively.
In company news, Australia's securities regulator appointed former central bank deputy governor Guy Debelle to an expert panel to investigate ASX's governance, capability and risk management frameworks.
However, the bourse operator's stock rose 0.3%.
New Zealand's benchmark S&P/NZX 50 index fell 0.2% to 12,432.41 points.
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