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Westpac Banking Corp (ASX:WBC) takes money off the BNPL table, Dumps Zip Co Limited (ASX:Z1P) Investment

  • October 22, 2020 04:37 PM AEDT
  • Team Kalkine
Westpac Banking Corp (ASX:WBC) takes money off the BNPL table, Dumps Zip Co Limited (ASX:Z1P) Investment

Summary

  • Westpac would be selling 10.7% of its stake in Zip Co Limited to institutional investors from Australia or any other relevant jurisdiction.
  • The decision to sell stake in Z1P was taken to simplify the business and confirm efficient use of the capital.
  • WBC partners with Afterpay, to enable the introduction of Afterpay savings accounts and cash flow tools for clients in Australia.
Gold MTF non-AMP

On 21 October 2020, Westpac Banking Corporation (ASX:WBC) announced that it would be selling 10.7% stake in Zip Co Limited (ASX:Z1P) via a fully underwritten bookbuild to institutional investors belonging to Australia or any other relevant jurisdiction.

The offer for the shares is A$6.65, a discount of 6.07% to the last closing price of Zip Co (A$7.08 on 21 October 2020). The decision taken by the Company shows WTC’s approach to simplifying its business and confirm that it makes efficient use of the capital. The sale will add around 8 basis points to WTC’s common equity tier 1 capital ratio.

Partnership with Peer Company Afterpay

A day before the above announcement, i.e. on 20 October 2020, Westpac Banking Corporation entered into a Collaboration Agreement with Afterpay Limited (ASX:APT) to enable the introduction of Afterpay savings accounts and cash flow tools for clients in Australia.

The new money management services facilitated by the new digital bank-as-a-service platform of Westpac complement the existing business of Afterpay by providing further customer-centric options to traditional banking products.

From FY2021, the new money management services would be made available. It would replicate the simplicity and transparency of the current services by Afterpay and will allow customers to control their budget, with an effective and smooth digital user experience.

Afterpay customers would be able to use their savings and process any transaction like paying bills, cash withdrawal and budgeting. Also, in the future, APT would introduce services and tools to provide further benefits to clients.

Management Commentary on Sale of 10.7% Stake in Zip Co Limited:

Gary Thursby, Chief Information Officer of Westpac, stated that the bank is continuing the process to explore prospects with Zip Co Limited. It comprises the integration of their ‘buy now pay later’ functionality into the mobile banking apps across Westpac and the regional bank brands. It would help Westpac to broaden its offering to the customers plus expand the customers that Zip can attain.

Gary also appreciated Larry Diamond, Peter Gray, and the management team for their tremendous efforts toward growing and expanding the business globally.

At present, Westpac is working with Zip Co on other opportunities for consumer, business, and corporate customers. It would be beneficial for both the businesses together while continuing to develop its banking connection with Zip.

UBS would act as Sole Lead Manager, Underwriter and Bookrunner in the Zip Co stake sale process. The settlement of the transaction would be on 26 October 2020.

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