Zip-Sezzle deal scrapped as rising rates hit consumer credit

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(Reuters) – Australian buy-it-now-pay-after (BNPL) firm Zip has dropped plans to take over U.S. rival Sezzle, the companies said on Tuesday, adding to the list of failed deals as rates rise interest has hurt consumer finance companies.

As part of the termination of the agreement, which is effective immediately, Sezzle would receive $11 million from Zip, the companies added in a joint statement.

BNPL companies have seen their market values ​​shrink rapidly in recent months as interest rate hikes aimed at tackling runaway inflation fueled concerns about a slowdown in consumer credit.

This led Australian group Latitude to withdraw its offer to buy Humm’s BNPL business, and BNPL company Openpay to suspend operations in the US market.

Zip cited “current macroeconomic and market conditions” as the reason to pull out of the deal, after saying in June “the acquisition of Sezzle remains on track.”

Australian firm BNPL added that it continues to expect the group to be profitable in the 2024 financial year.

“We remain committed to driving profitability and free cash flow and believe this [deal termination] is the best outcome for our shareholders,” said Charlie Youakim, CEO of Sezzle.

Sezzle, which was valued at A$491 million ($330.34 million) by Zip when the takeover was announced in February, has lost nearly 82% of its value to A$84.9 million, to Monday’s close.

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