Xero Limited – Strategic Acquisition of Hubdoc

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Xero Limited (ASX: XRO) announced the acquisition of Hubdoc for the consideration of US$ 70 Mn in which the transaction will be paid in two stages, with the initial purchase price of US$60 Mn consisting of 35 per cent in cash and 65 per cent in Xero equity. However, the group has already arranged new debt funding for the cash component of the aforesaid deal while the rest payment of US$10 Mn in equity will be issued to Hubdoc’s shareholders within 18 months and this will be subject to meet the agreed operational targets and conditions. The first tranche of equity will be issued based on a five trading-day Volume Weighted Average Price (VWAP) ending 30 July 2018, and the second tranche will be issued based on a five trading-day VWAP at the time of issue.

Hubdoc was incorporated in 2011, headquartered in Toronto, Canada. It provides data capture solution to its customers that helps accountants, bookkeepers, and small businesses to simplify administrative works like financial document collection and data entry. Currently, Hubdoc has a strong footprint in the US, Canada, UK, and Australia.

As per the arrangement, Hubdoc will keep on operating its business as on stand-alone basis within the XERO premises. Moreover, it will keep on being sold independently and will stay accessible to non-Xero clients, yet after some time it will be incorporated more deeply into the Xero platform and servicing customers globally. However, Xero will remain fully dedicated to its open ecosystem strategy and its customers will keep on having full access to in excess of 700 apps that connect with Xero.

With this news, the stock climbed up 3.5 per cent to $44.310 with the market-cap of circa $5.96 bn as on August 01, 2018 (AEST: 3:30 P.M.).

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