SYDNEY, Feb 28 (Reuters) – Australian buy-it-now, pay-later (BNPL) company Zip Co Ltd (Z1P.AX) is planning to buy U.S. rival Sezzle Inc for 491 million Australian dollars (352.59 million dollars), bolstering its presence in the largest retail market, as sluggish trade elsewhere earned it a half-year loss.

Zip and Sezzle, which are both listed in Australia, previously revealed they were discussing a takeover. They said they agreed terms on Monday, just as Zip confirmed a loss of A$108.1 million for July-December, excluding one-time items, against a small underlying profit a year earlier.

Zip also said the pre-tax loss was halved to A$214.2 million after taking into account one-time items, including an A$44.7 million impairment charge on its UK unit that it had bought for around A$50 million in 2019. He had previously blamed rising bad debts and disappearing COVID-19 stimulus payments for a weaker operating environment. Read more

“The UK remains further away than we would like to continue investing at the same pace,” said chief executive Larry Diamond, founder and largest shareholder of Zip with 9.3% of its shares.

“We still believe in the global opportunity. What we call it is the strategy of investing in core markets where we are closer to profitability,” he said on a call with investors. analysts.

The cost savings realized by combining the two companies would allow Zip to turn a profit in 2024, Zip said in a statement.

The BNPL sector experienced a meteoric rise during the COVID-19 pandemic when online shoppers preferred other sources of credit for their purchases. It has since quickly consolidated, with Jack Dorsey-backed Block Inc’s (SQ.N) takeover of Afterpay for $29 billion in August among the biggest deals in the industry.

Shares of Zip and Sezzle were on hold as Zip sought to raise up to A$198.7 million in a share offering alongside a planned buyout of all shares of its rival focused on the United States.

“While we view the acquisition of Sezzle as positive in terms of reducing the cost base, we expect the focus to be on realizing revenue synergies,” Citi analysts said in a statement. client note, pointing out that Zip’s half-year results had been pre-announced.

($1 = 1.3924 Australian dollars)

Reporting by Byron Kaye in Sydney and Sameer Manekar and Indranil Sarkar in Bengaluru; Editing by Uttaresh.V and Christopher Cushing

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