Xero builds war chest of $1bn to ‘execute strategy’
Xero says the company is ready to ramp up its ambitions both locally and abroad.
The chief executive of cloud accounting software firm Xero says the company is ready to ramp up its ambitions both locally and abroad, after the company announced it had priced $US700m ($954m) of zero coupon, senior unsecured convertible notes.
The move will give Xero a cash balance of more than $1bn, and chief executive Steve Vamos said it would give the company room to scale, through either acquisitions or fast organic growth.
In September Xero announced it was picking up invoicing start-up Waddle in a deal worth up to $80m, and similar deals could be on the cards.
“This is really about the long-term growth opportunity and executing our strategy,” chief executive Steve Vamos told The Australian. “It’s about driving the adoption of cloud accounting around the world, because it’s still early days, and continuing to build out Xero as a platform.
“We needed to ensure we had additional capital to take hold of the opportunities we’ve been talking about, and reducing the level of potential dilution of the Xero existing shareholders.”
The notes will mature on December 2, 2025, and will have an initial conversion price of $US134.7246 per ordinary share, a conversion premium of 35 per cent over the reference share price.
The company expects net proceeds of $US685.3m to be used to fund the costs of call option transactions, to repurchase existing notes, for corporate purposes and to fund potential acquisitions and strategic investments.
A total of $US294.031m of the existing convertible notes due in 2023 will be subject to a buyback, while the existing call spread arrangement will be wound down in favour of a new call spread arrangement netting $US19.6m.
Goldman Sachs International and Morgan Stanley & Co International will act as joint lead managers on the offering.
Mr Vamos added Xero had experienced an unusual and challenging half in all regions in terms of new subscribers.
Xero shares closed down 4.36 per cent at $129.94.
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