Xero Limited (ASX:XRO) Acquires Melio to Accelerate Global Growth
Acquisition Details
Xero Limited has entered into an agreement to acquire 100% of Melio Limited, a leading US SMB bill pay platform, for an upfront consideration of US$2.5 billion (A$3.9 billion) in cash and Xero scrip. Additional contingent payments of up to US$0.5 billion may be payable over three years based on performance targets.
Financial Terms
The acquisition is funded through a fully underwritten A$1.85 billion institutional placement, approximately US$0.36 billion in Xero scrip issued to Melio shareholders, a US$0.4 billion unsecured revolving credit facility, and US$0.6 billion of existing cash on Xero’s balance sheet. Xero maintains a pro forma FY25 net debt/EBITDA of approximately 2.3x following the transaction.
Strategic Rationale
The acquisition aligns with Xero’s 3×3 strategy, enhancing its US value proposition and scale. The combined business is expected to more than double Xero’s FY25 group revenue by FY28, excluding anticipated synergies, and support greater than Rule of 40 outcomes for the group.
Executive Comments
CEO Sukhinder Singh Cassidy stated, “We’re thrilled to announce we’re acquiring Melio, a leading, high-growth US B2B payments platform that strongly aligns with our 3×3 strategy and US growth ambitions. Adding Melio’s world-class team, technology platform, and innovative A/P 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.”
Motley Fool contributor Lianne Eastty has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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