The Xero Limited (ASX: XRO) share price will be in focus on Wednesday following the release of an announcement after the market close.
What did Xero announce?
This afternoon Xero announced the launch of an offering of US$600 million senior unsecured convertible notes due in 2025 to be issued by its wholly owned subsidiary, Xero Investments, and guaranteed by Xero.
Xero’s CEO, Steve Vamos, advised that the note offering represented the next step in its ongoing program to optimise the company’s financial structure as it executes its strategic priorities.
According to the release, the notes will be listed on the official list of the Singapore Stock Exchange and their conversion will be settled in cash. This is unless the issuer elects to physically settle the conversion through the issue of Xero shares to the relevant noteholders.
Why is Xero launching a notes offering?
Xero advised that it will be using the proceeds, after all costs, to repurchase its existing notes, fund potential acquisitions and strategic investments, and for general corporate purposes.
Xero’s chief financial officer, Kirsty Godfrey-Billy, expects the notes offering to create value for shareholders.
She said: “The new offering, combined with the restructuring of our existing convertible note liability, will benefit shareholders and provide Xero with additional financial flexibility to pursue strategic investments, and deliver ongoing innovation and support of our customers and partners.”
Xero is no stranger to making bolt-on acquisitions. Just last month the company completed the acquisition of Waddle.
Waddle is a cloud-based lending platform that helps small businesses access capital through invoice financing. Management noted that the acquisition aligns with its strategy to grow the small business platform and to address critical small business financial needs.
That acquisition was for an upfront cash payment of A$31 million and subsequent earnout payments based on product development and revenue milestones of up to A$49 million.