(Reuters) - Zip Co Ltd (AX:Z1P) said on Tuesday it will buy out buy-now-pay-later (BNPL) firm QuadPay in a stock deal valuing the New York-based company at $269 million, as the Australian firm looks to tap the fast-growing U.S.-market where its rivals are thriving.
Zip will offer 119 million shares, or about 23% of the company, to shareholders of QuadPay for the remaining 86% of the U.S. firm it does not already own.
Larger rivals like Afterpay Ltd (AX:APT) and Sweden's Klarna have flourished in the United States, building on the BNPL sector's growing popularity, especially with millennials, as it allows consumers to buy products in interest-free installments.
The news sent Zip shares soaring as much as 44% to A$5.40, their highest since October last year.
The firm also said it secured up to A$200 million ($135.70 million) from an affiliate of Susquehanna International Group through the issue of notes and warrants, highlighting growing investor interest in the space.
Tencent Holdings Ltd (HK:0700) recently scooped up a 5% stake in Afterpay, just months after Ant Financial, an affiliate of Alibaba Group Holding Ltd (N:BABA), bought a small stake in Klarna - which already counts Commonwealth Bank of Australia (AX:CBA) and rapper Snoop Dogg as backers.
Once the deal is completed, Zip said the combined company will have about 3.5 million customers and more than 26,000 merchants signed up, with annual revenue of over A$250 million.
The numbers are still far off the likes of Afterpay, which has more than five million active customers in an increasingly crowded U.S. market.
Last month, Canadian e-commerce firm Shopify Inc (TO:SHOP) said it would also enter the U.S. BNPL market later this year.
($1 = 1.4738 Australian dollars)