The Zip Co Ltd (ASX: Z1P) share price has risen over 4% in reaction to an exciting acquisition.
Zip Co provides customers with a revolving line of credit to finance their retail purchase with its brands of Zip Pay, Zip Money and Pocketbook. It is one of the largest buy now, pay later providers in Australia. Some of its largest clients include Bunnings Warehouse, Appliances Online, EB Games and Officeworks.
Zip’s International Acquisitions
The buy now, pay later (BNPL) business has announced it’s acquiring global instalment technology platform, PartPay (headquartered in Auckland), which operates in New Zealand, the UK, the US and South Africa.
It’s also going to acquire a direct equity interest in New York based BNPL business QuadPay.
PartPay And QuadPay
It was established in January 2017 and now has over 110,000 customers across over 250,000 instalment plans and is integrated in over 1,000 retailers such as The Warehouse Group, New Zealand’s leading retail group, and Spark New Zealand Ltd (ASX: SPK), New Zealand’s largest telco.
Zip Co said that PartPay will complement the Australian merchant base. Like Zip, PartPay has been conducting credit and ID checks from inception.
Partpay’s technology has been successfully used in other international markets where, in exchange for its codebase, PayPay secured strategic shareholdings of 8.9% of QuadPay in the US and 24.7% of Payflex in South Africa.
QuadPay was launched in January 2018 and Payflex was launched in September 2018 (the first in South Africa) and can grow in Sub-Saharan Africa.
Zip will pay NZ$50.8 million with a potential earn-out of up to NZ$15 million based on potential milestones.
But Zip will also enter into a subscription agreement with QuadPay to invest a further US$11.4 million into QuadPay to bring its ownership up to 15%, allowing it to appoint a director and receive priority allocations in further investment rounds.
Is The Zip Share Price A Buy?
I can see why investors decided to send the share price higher in reaction. International expansion significantly improves the total addressable market for Zip and will put it in competition with Afterpay Touch Group Ltd (ASX: APT) in the international markets.
But, it’s the not the type of business I normally invest in for my own portfolio. I prefer investing in growth shares that face less competition with an easier path to profit growth, such as the ones in the free report below.
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