Xero to acquire US payments platform Melio in $4.1b deal

Xero chief executive Sukhinder Singh Cassidy. Photo / Supplied

Wellington-based Xero plans to buy Melio, a leading US business-to-business bill paying platform, in a cash and share deal worth US$2.5 billion ($4.1b).

Melio integrates accounting and payments, offering US SMBs (small to medium sized businesses) and their advisers easy-to-use accounts payable workflows and a wide choice of payment methods, Xero, an accounting software platform, said.

“Acquiring Melio delivers a step change in Xero’s US value proposition and scale,” the company said.

“This acquisition solves a critical customer need, uniting accounting and payments in one platform for customers.”

Xero has a “3x3 strategy” which focuses on improving its core accounting, payroll, and payments solutions within its three key markets - Australia, the United Kingdom, and the US.

“It’s a powerful strategic fit, aligning with Xero’s 3x3 strategy and it brings Melio’s world-class team and platform to Xero,” Xero said.

“This will drive compelling value creation for the US business and the group globally.”

Xero is listed on the ASX, having ditched its NZX listing in 2018.

The company said the upfront consideration will be funded through a combination of a fully underwritten A$1.85b (US$1.2b) institutional placement, US$0.36b of Xero scrip issued to existing Melio shareholders, a fully underwritten US$0.4b unsecured revolving credit facility, and US$0.6b of existing cash on Xero’s balance sheet.

Xero chief executive Sukhinder Singh Cassidy said Melio is a leading, high-growth US business-to-business payments platform that strongly aligns with Xero’s strategy and US growth ambitions.

“Adding Melio’s world-class team, technology platform, and innovative accounts payable solutions to Xero enables a step change in our North America scale and the potential to help millions of US SMBs and their accountants better manage their cash flow and accounting on one platform,” she said.

“Xero and Melio are highly complementary — together they complete the key jobs to be done for US SMBs, extend reach across customer segments, provide both direct and syndicated offerings, and deliver multiple revenue drivers.“

Xero shares last traded on the ASX at A$194.21.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.