Zip Co moves to end US FOMO with acquisition

Sarah Thompson, Anthony Macdonald and Tim Boyd

Jun 1, 2020 – 1.30am

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Forget about Afterpay for a minute – rival Zip Co is looking to increase its own investment in the buy now, pay later sector.

Street Talk understands Zip was nearing a deal to buy full control of QuadPay, which is a split payments service based in New York, less than one year after it upped its stake to 15 per cent.

Investor sources said Zip and its bankers, Bank of America, were mulling funding options including an equity raising over the weekend.

Zip co-founders Peter Gray, left, and Larry Diamond. James Brickwood

It is understood Zip was seeking to have the deal finalised as early as this week, although its interest was subject to market conditions and it was possible that the talks could be called off.

The deal would be expected to dramatically increase Zip's exposure to the United States, which is the holy grail for anything consumer spending related and the reason why its rival Afterpay's shares have gone bananas.

Such a transaction would be expected to have fund managers taking another look at Zip, to see whether it can get the sort of early growth Afterpay has attained.

Zip, which is backed by Westpac Banking Corp, has had its eyes on QuadPay for years. QuadPay was founded by a couple of Sydney boys – Adam Ezra and Brad Lindenberg – and has a diverse mix of shareholders. Some of those shareholders were told about the potential deal over the weekend.

Zip snapped up a foothold in QuadPay last August as part of its acquisition of PartPay, headquartered in New Zealand. It invested further capital to take its stake to 15 per cent and has spruiked it as a strategic investment to shareholders.

It is understood Bank of America, Arnold Bloch Leibler and Skadden Arps are advising Zip. QuadPay is advised by Gilbert + Tobin and DLA Piper.