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Highlights
- Xero acquires US payments firm Melio in $3.9 billion deal
- Acquisition aims to more than double North American revenue by FY28
- Capital raise and share purchase plan to fund the transaction
Xero (ASX:XRO), the ASX300-listed accounting software giant, is making headlines with its latest strategic move—announcing the acquisition of Melio, a US-based payments platform focused on small and medium-sized businesses. This all-cash and stock transaction, valued at A$3.9 billion (US$2.5 billion upfront), is set to significantly enhance Xero’s scale and growth trajectory in the lucrative North American market.
Strategic Intent Behind the Acquisition
Melio is known for its seamless integration of accounting and payment workflows, offering robust accounts payable features and diverse payment method support. For Xero, this acquisition represents a decisive step toward solving a critical customer need: unifying accounting and payments on a single platform. By embedding Melio’s capabilities, Xero aims to accelerate its North American expansion and position itself as a more compelling choice in a highly competitive software landscape.
The acquisition is expected to triple Xero’s North American revenue and average revenue per user (ARPU) immediately upon completion. Management also indicated the transaction could help more than double total revenue by FY28, even without factoring in additional revenue synergies.
Funding Strategy and Capital Structure
To fund the acquisition, Xero has outlined a comprehensive multi-pronged approach:
- Institutional Capital Raise: A fully underwritten capital raise of A$1.85 billion (US$1.2 billion)
- Equity Issuance: New Xero shares worth US$0.36 billion will be issued to Melio shareholders
- Debt Facility: US$0.4 billion secured through a revolving credit facility
- Cash Reserves: US$0.6 billion sourced from Xero’s existing balance sheet
An additional payment of up to US$0.5 billion may be disbursed over the next three years, tied to predefined performance milestones and continued operational alignment.
Share Purchase Plan (SPP) for Investors
Xero is also initiating a non-underwritten Share Purchase Plan (SPP) aimed at raising A$200 million. Eligible shareholders can apply for up to A$30,000 worth of shares at either $176 per share or a 2% discount to the five-day average share price before the offer closes—scheduled for 21 July 2025.
Positioning Within the ASX300
This move further cements Xero’s standing within the ASX300 as a leading tech player. With a sharper value proposition for the US market and a robust funding plan, Xero appears poised to strengthen its foothold globally. The Melio acquisition marks a pivotal chapter in Xero’s growth story—one that blends strategic foresight with operational execution.
