Why is the Sezzle (ASX:SZL) share price rocketing 20% higher?

Sezzle is a takeover target…

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Key points

  • Sezzle shares are rocketing after confirming takeover talks with Zip
  • Zip is looking to acquire Sezzle but talks are at a preliminary stage
  • No financial details have been provided to the market

The Sezzle Inc (ASX: SZL) share price is having its best day in a long time on Tuesday.

In late morning trade, the buy now pay later (BNPL) provider’s shares are up 20% to $2.57.

Why is the Sezzle share price shooting higher?

The catalyst for the rise in the Sezzle share price on Tuesday has been news that the company is a takeover target.

According to the release, Sezzle has confirmed that it is in discussions with larger rival Zip Co Ltd (ASX: Z1P). However, it has warned that talks are at an early stage and there’s no guarantee that a transaction will materialise.

The company commented: “Sezzle confirms that it is currently engaged in preliminary discussions with Zip regarding a possible merger. No definitive agreement has been reached between the parties in relation to any transaction. There is no certainty at this time that these discussions will result in a transaction.”

Zip also responded to the speculation by confirming the talks. It said: “Zip confirms it is in discussions with Sezzle in relation to a potential acquisition. Zip is always interested in pursuing options that are in the best interests of shareholders.”

What price will Zip pay for Sezzle?

Neither party has provided any indication of the proposed terms of the deal. However, The Australian has suggested that Zip would be required to pay a 50% premium to the Sezzle share price at the close of play on Monday.

That would mean a price of approximately $3.21 per share, which values Sezzle at a little under $600 million. While this is a far cry from Sezzle’s 52-week high of $11.99, a lot has changed in the sector in respect to valuations since its shares were trading at that level.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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