The Zip Co Ltd (ASX: Z1P) share price has surged 8% in early trade after the company announced a key strategic acquisition to expand its international profile.
What did Zip announce this morning?
Zip announced that it is set to acquire 100% of the shares in PartPay Ltd to increase growth in its "buy now, pay later" business internationally.
The Auckland-based PartPay has operations in New Zealand, the United Kingdom, the United States and South Africa, which will boost Zip's international capabilities significantly.
Zip said the acquisition will provide it with a portable platform that has been "localised to international markets" and is easily adaptable to new geographies.
Additionally, PartPay will increase Zip's New Zealand presence with synergistic benefits, while a ready-made United Kingdom subsidiary gives it a solid foundation to combat rival Afterpay Touch Group Ltd (ASX: APT).
Afterpay has plans to expand into the United Kingdom in the short-term following the successful build-out of its United States operations over the last 6–12 months.
According to the release, PartPay has grown to have more 110,000 customers since it began in January 2017, and founder John O'Sullivan is set to remain at the helm, post-acquisition.
PartPay also holds stakes in QuadPay in the United States (8.9% ownership) and Payflex in South Africa (24.7% ownership), which will boost Zip's international aspirations significantly.
Zip is set to invest a further US$11.4 million in QuadPay to bring its stake in the US-based group to 15%.
All in all, Zip will pay upfront consideration of NZ$50.8 million with an earn-out of up to a further NZ$15.0 million based on certain milestones being achieved in FY20 and FY21.
How has the Zip share price reacted?
Investors have liked what they see from Zip's acquisition news, with the Zip share price initially surging 8% at the market open before tempering to around 5% at the time of writing.
The Zip share price has already rocketed 284% so far this year, and in my view, the acquisition represents a big step for Zip in boosting its name and operations internationally.
