Xero to Acquire US Fintech Melio for $2.5 Billion, Expanding into U.S. Market

By Byron Kaye and Rajasik Mukherjee

(Reuters) - New Zealand accounting software giant Xero has agreed to buy New York-based payments provider Melio for $2.5 billion, the companies announced on Wednesday, marking the country's biggest outbound deal in over a decade and furthering Xero's expansion into the U.S. market.

The deal, which fills a gap in Xero's offerings by adding payments to its accounting software, will enable both parties to scale up their operations. Australia-listed and New Zealand-headquartered Xero dominates its home markets but has been looking to grow in the U.S., where it currently generates about 7% of its sales.

"This acquisition enables a step change in our North America scale and the potential to help millions of U.S. small-to-medium businesses and their accountants better manage their cash flow and accounting on one platform," said Xero CEO Sukhinder Singh Cassidy in a statement.

Xero expects the buyout, which is the biggest outbound acquisition by a New Zealand company since 2011, according to LSEG data, to double its 2025 financial sales by 2028.

Melio co-founder and CEO Matan Bar said he was "excited by our shared purpose to scale in the U.S. and combine Xero's accounting capabilities with Melio's accounts payable and receivable solutions."

Shares of Xero were suspended from trading on Wednesday as the A$30 billion ($19.5 billion) market capitalization company sought A$1.85 billion from institutional investors to help finance the purchase.

Analysts gave a cautious endorsement of the deal, with RBC Capital Markets analyst Garry Sherriff noting that "there is much to like in terms of bulking up U.S. exposure with a leading, fast-growing payments player and longer term the proposed deal makes sense." However, E&P analyst Paul Mason said the buyout price "looks pretty full for the stand-alone business but works if you think the company can pull off strategic synergies around greater distribution."

($1 = 1.5387 Australian dollars)

(Reporting by Byron Kaye in Sydney and Rajasik Mukherjee in Bengaluru; Editing by Maju Samuel, Sonali Paul and Lincoln Feast.)