The Zip-Sezzle deal was scrapped as rising rates hit consumers’ finances

(Reuters) — Australian buy-now-pay-later (BNPL) has scrapped a plan to buy U.S. rival Sezzle, the companies said on Tuesday, adding to a list of failed deals as rising interest rates hurt consumer finance companies.

As part of the termination, which is effective immediately, Sezzle will receive $11 million from Zip, the companies added in a joint statement.

BNPL companies have seen their market value shrink rapidly in the past few months as interest rate hikes to tame rising inflation fueled concerns about a slowdown in consumer finance.

This prompted Australia’s Latitude Group to withdraw its bid to buy Humm’s BNPL business, and fellow BNPL company Openpay to pause its operations in the US market.

Zip cited “current macroeconomic and market conditions” as the reason for backing out of the deal, after saying in June that “the acquisition of Sezzle remains on track.”

Australia’s BNPL added that it still expects to achieve group profitability during fiscal 2024.

“We remain committed to moving towards profitability and free cash flow, and we believe in it [deal termination] is the best outcome for our shareholders,” said Charlie Youakim, CEO of Sezzle.

Sezzle, which valued Zip at A$491 million ($330.34 million) when it announced the buyout in February, lost nearly 82% of its value to AU$84.9 million as of Monday’s close.

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