The cross-border deal involved a $403m acquisition and a convertible note fundraising
Arnold Bloch Leibler (ABL) has advised ASX-listed buy-now-pay-later (BNPL) company Zip Co Limited on two deals that will help its expansion into the US.
The first transaction involves the acquisition of New York BNPL business QuadPay Inc for $403m. As a result of the deal, Zip will bring its customer base up to more than 3.5m, and boost its merchant base to over 26,000. Some of these merchants are big names like Amazon, Cotton On, Kmart and Bunnings.
In a statement to ASX, Zip said that the acquisition enhances its presence in several BNPL markets across the globe, including the US, UK, Australia and New Zealand. QuadPay co-founders and co-CEOs Adam Ezra and Brad Lindenberg will also join Zip’s global leadership team to scale and grow the US branch of the business.
To support its new acquisition, Zip is looking to raise up to $200m through convertible notes and warrants with US growth investor Heights Capital Management. The investor is part of the Susquehanna International Group, and its investment portfolio is composed of high-growth small to medium-sized businesses.
“The fundraising—which will be executed via a PIPE or private investment in public equity transaction—is unique for the Australian market,” ABL said.
The raising involves $100m convertible notes with a tenor of five years and a fixed coupon of $0.75m per semi-annual instalment. It also involves up to $100m warrants with an exercise period of three years.
“If the warrants are fully exercised at the initial exercise price, Zip will receive an additional $100m of capital,” Zip said.
The deal is expected to be completed in Q1 of FY2021.
ABL partner Jeremy Leibler led the firm’s team in working on the transaction, supported by senior associate Gavin Hammerschlag and lawyers Vidushee Deora and Max Grunwald.
“It’s been really exciting to work with Zip and its management team on their global expansion into the US, taking their operations to a total of five countries and helping them deliver on their long-term growth strategy,” Hammerschlag said.
The team coordinated with US firm Skadden, Arps, Slate, Meagher & Flom given the cross-border nature of the acquisition. Skadden's multidisciplinary team consisted of M&A partners Jeffrey Brill and Sven Mickisch and associates Matthew Nemeroff, Jonathan Berger, Rahul Bhasin and Alexandra Gallogly; tax partner Brian Krause; financial institutions regulation and enforcement partner Brian Christiansen; executive compensation and benefits partner Erica Schohn; capital markets partner Adrian Deitz; and intellectual property and technology counsel Jessica Cohen.
ABL also brought in its taxation experts to provide advice on key tax matters. Partners Clint Harding and Jonathan Ortner headed the tax team, which was rounded out by special counsel Zoe Chung and senior associate Peter Scott.
Last August, the firm had also assisted Zip Co on its acquisition of global instalment technology platform PartPay Limited—the company’s first international transaction.
