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Zip Co (ASX: Z1P) is spreading its wings into new markets with an acquisition that sees it following in the footsteps of competitors in a global marketplace for buy-now pay-later (BNPL) services.
Similar to the way that Afterpay has pushed significantly into the US, and how Swedish buy-now pay-later solution Klarna has arrived in Australia via Commonwealth Bank (ASX: CBA), Zip is expanding overseas too.
The company has agreed to acquire 100 per cent of the shares in PartPay, providing the platform with exposure to New Zealand, United Kingdom, United States and South Africa.
PartPay is a New Zealand-based business that has already been localised in international markets and has an early-stage UK subsidiary that is poised for scale.
Established in January 2017, the company has more than 110,000 customers across 250,000 instalment plans and is integrated into more than 1,000 retailers.
Zip says PartPay is an ideal fit as an acquisition partner, considering they both conduct credit and ID checks during the service.
PartPay's key management team will remain with the business and join the Zip team.
Whilst PartPay's strengths lie in New Zealand, the company's platform has been successfully deployed into other markets where, in exchange for its codebase, PartPay secured strategic shareholdings. These shareholdings are in QuadPay in the US and Payflex in South Africa.
Zip's acquisition of PartPay will not be paid in four fortnightly transactions, rather a total upfront consideration of NZ$50.8 million, with an earn-out of up to a further NZ$15 million based on certain performance milestones being achieved in FY20 and FY21.
Concurrently with Zip's acquisition of PartPay is the announcement that Zip has also acquired a strategic equity interest in QuadPay, aligning PartPay, Zip, and QuadPay even further.
Zip CEO Larry Diamond has welcomed this new global era for Zip.
"This transaction marks the beginning of Zip's global expansion story," says Diamond.
"Whilst we see significant upside in the core Australian business, we feel the timing is opportune to begin investing abroad as we seek to build a global payments business."
"There is clear and strong alignment between PartPay's and Zip's philosophy on responsible credit, and we look forward to working with PartPay's highly capable management team as we grow our market share in New Zealand and expand into the United Kingdom."
Shares in Zip Co are up 1.99 per cent to $3.08 per share at 10.42am AEST.
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