Zip’s Sezzle takeover too expensive: analyst

Zip (ASX: Z1P) is already facing mounting criticism for its proposed takeover of rival BNPL, Sezzle (ASX: SZL). 

You can read more about the acquisition here. 

Initial broker thoughts

Citi flagged the merger as an expensive customer acquisition strategy that raises more questions than answers. 

Some areas of concern for the broker included: 

• Likelihood of $40-50m transaction synergies to be realised 

• High customer overlap (25%)

• Introducing a fee for Sezzle users 

• Medium term revenue yield of 6-7%

The broker maintained a neutral rating and $3.65 target price. 

The price target seems more like a formality given where Zip shares have come from rather than the state of the BNPL sector.

Post placement performance

Zip emerged from its trading halt this morning, raising $148.7m from institutional investors.

The placement was priced at $1.90 per share, a 14% discount to Zip's last closing price of $2.21 and represents 13.3% of the company's existing shares on issue.

Zip shares held up relatively well given the discount and size of the raising, closing -6.3% lower at $2.07.

23.6m shares were traded compared to a 20-day average of 8.7m (+270%).

Zip 12-month share price chart