NZ-based Xero to fork out over $2.5 billion for Melio in big US fintech bet
New Zealand's information technology giant Xero said on Wednesday it would buy U.S.-headquartered fintech firm Melio for an upfront consideration of $2.5 billion, aiming to more than double its group revenue by 2028.
The cash-and-stock deal would also see Melio receive up to $500 million in deferrals and rollovers, laid out over the next three years.
The payment is largely tied to Melio meeting specific performance targets, with the rest dependent on time-based milestones and annual goals.
Fintech companies are revolutionizing financial management with user-friendly solutions, attracting billions in investment. The recent rise of digital bank Chime and Israeli trading platform eToro underscores the growing demand for the industry.
The acquisition will "significantly boost" Xero's top line, as the firm expects the combined business to more than double its group revenue in 2028, compared with fiscal 2025.
The acquisition will also accelerate Wellington-headquartered Xero's U.S. revenue growth and integrate accounting and payment solutions on a single platform, enhancing services for its 4.4 million subscribers.
"While Xero's acquisition of Melio is a high-conviction, long-term strategic play to supercharge its U.S. growth, it comes with...heightened exposure to a competitive and evolving U.S. fintech landscape," said Mark Gardner, CEO and head of equities advisory at MPC Markets.
Melio, which has offices in New York and Tel Aviv, provides digital bill payment solutions for small businesses.
"Xero and Melio are highly complementary... together they complete the key jobs to be done... provide both direct and syndicated offerings, and deliver multiple revenue drivers," Xero CEO Sukhinder Singh Cassidy said in a statement.
The deal will be funded through a placement to raise $1.2 billion and a $400 million unsecured credit facility, among others.
Shares of Xero had gone on a trading halt earlier in the day.
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