Sezzle (ASX:SZL) share price on watch after accepting Zip takeover offer

Sezzle is being acquired by Zip

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Key points

  • Sezzle is being acquired by Zip in a $491 million all-scrip deal
  • Sezzle shareholders will receive 0.98 Zip shares for every Sezzle share owned
  • This represents an approximate 22% premium to Sezzle's last close price.

The Sezzle Inc (ASX: SZL) share price is frozen on Monday morning.

This follows a trading halt request by the buy now pay later (BNPL) provider prior to the market open.

Why is the Sezzle share price halted?

The Sezzle share price has been halted on Monday after signing an agreement to be taken over by rival Zip Co Ltd (ASX: Z1P).

According to an announcement out of the latter, Sezzle has agreed to a deal that will see shareholders receive 0.98 Zip shares for every Sezzle share owned.

Based on the current Zip share price, this implies a price of $2.1658 per Sezzle share, which represents a premium of almost 22% to Sezzle's last close price and values the company at $491 million.

What is management saying?

Sezzle's Co-Founder, Executive Chairman, and CEO, Charlie Youakim, has spoken very positively about the agreement.

He said: "We are extremely excited about the opportunity to create a leader in the financial services industry by combining with Zip and its management team led by Larry [Diamond] and Pete [Gray]. Paul [Paradis] and I believe it will be a great cultural fit for both our organisations and we're excited to be part of Zip's next chapter. I believe the transaction will position us to win in the U.S. and globally."

This sentiment was echoed by the team at Zip, which believes the deal will be transformational.

Zip's Co-Founder and Global CEO, Larry Diamond, said: "We are delighted to be bringing Zip and Sezzle together under a transformational transaction that is expected to deliver immediate scale and enhanced growth, which will support our path to profitability. Combining with Sezzle positions us as a leading global BNPL provider and prioritises our ability to win in the important U.S. market,"

"Pete and I have known Charlie and Paul (cofounders of Sezzle) for some time, and we've been impressed by what the Sezzle team has achieved. Their responsible lending, their Sezzle Up credit builder programme, as well as their B Corp certification is to be admired. We're excited to welcome the entire Sezzle team on our journey, as we continue our mission towards being the first payment choice, everywhere and every day," he added.

What now?

The Sezzle Board has unanimously determined that the proposed transaction is fair and in the best interests of Sezzle and its shareholders. As a result, it is unanimously recommending that Sezzle shareholders vote in favour of the proposed transaction.

It's a similar story over at Zip, with its Board unanimously recommending that its shareholders vote in favour of the resolutions necessary to implement the transaction.

If all goes to plan, the deal is expected to complete during the third quarter of calendar year 2022.

In the meantime, the Sezzle share price is expected to remain in a trading halt until Tuesday morning, pending the release of an announcement that day.

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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