Shares in ASX-listed accounting software provider Xero Inc (ASX:XRO) fell sharply in early trade, following its discounted institutional placement to help fund the proposed US$2.5 billion (A$4 billion) acquisition of United States-based payments platform Melio. Shares in Xero are currently trading at $180.025, down 7.3 cents.
Xero raised A$1.85 billion (US$1.2 billion) through a fully underwritten institutional placement to support the acquisition of Melio.
The proceeds will be used to fund the transaction and associated costs.
“We can’t wait to welcome Melio’s world-class team to Xero, once the transaction completes, and work together to deliver on our shared goals,” chief executive officer Sukhinder Singh Cassidy said.
In addition, Xero will offer a non-underwritten share purchase plan (SPP) to eligible retail investors, targeting approximately A$200 million.
Institutional placement details
Xero issued approximately 10.5 million new fully paid ordinary shares at A$176 per share to sophisticated and institutional investors. The trading halt is expected to be lifted prior to market open on June 26, 2025.
Settlement of shares will take place on June 30, 2025, with normal trading commencing on July 1, 2025. All new shares will rank equally with existing shares from the date of issue. Existing institutional shareholders who bid within their pro rata entitlement were fully allocated on a best endeavours basis.
Share purchase plan for eligible retail investors
The non-underwritten SPP will offer eligible shareholders the opportunity to invest up to A$30,000 free of transaction and brokerage fees. The issue price will be the lower of the placement price or a 2% discount to the five-day volume-weighted average price up to the SPP’s closing date of July 21, 2025.
An SPP booklet will be dispatched on or around July 2, 2025, with funds raised to support general corporate and working capital purposes.
Melio acquisition overview
Founded in 2018, Melio provides accounts payable, receivable, and cash flow management solutions to over 80,000 small and medium businesses in the United States. The company reported US$153 million revenue for FY25, achieving a compound annual growth rate of 127% since 2021.
Melio’s platform is integrated with major financial institutions and platforms such as Capital One and Shopify, and serves as a technology provider through distribution partners like Fiserv. The acquisition aligns with Xero’s ambitions to expand its US footprint and strengthen its accounting and payments capabilities.