Westpac dumps Zip stake following deal with rival Afterpay

Westpac has announced it will dump its substantial stake in Zip Co just one day after it signed a deal with its buy now, pay later rival Afterpay.

Westpac said it would sell its 10.7 per cent stake in Zip for a massive profit, with the sale expected to generate a $360 million payday for the bank which has invested $49 million in the company since 2017.

It comes one day after Westpac and Afterpay announced a partnership that will offer banking services to Afterpay’s 3.2 million Australian customers.

Westpac is parting ways with Zip founders Peter Gray and Larry Diamond with the sale of its stake in the business.
Westpac is parting ways with Zip founders Peter Gray and Larry Diamond with the sale of its stake in the business.Credit:James Brickwood

Afterpay shares, which listed in 2016 at $1, closed above $100 for the first time after the announcement.


Westpac said the decision to sell its stake in Zip reflects its approach to simplifying its business and ensuring the efficient use of capital.

“Larry Diamond, Peter Gray and the management team of Zip have done a tremendous job growing the company, including expanding globally. We look forward to seeing them continue to grow a global
customer franchise,” Westpac chief information officer Gary Thursby said.

He indicated that Westpac was still looking to partner with Zip. It was expected to be the first company to sign on to the bank’s digital banking platform rather than its rival Afterpay.

“We are continuing to explore opportunities with Zip, including working to integrate their buy now, pay later functionality into our mobile banking apps across Westpac and our regional bank brands. This would expand our offering to customers and broaden the customers Zip can reach,” Mr Thursby said.

“We are also working with Zip on other opportunities for consumer, business and corporate customers that we believe could be mutually beneficial, while continuing to develop our banking relationship with Zip.”

Zip’s share price has soared along with the rest of the buy now, pay later sector, hitting a high of $9.65 in August. Zip shares closed on Wednesday at $7.08. Westpac said it plans to sell the shares via a fully underwritten bookbuild to institutional investors at $6.65 a share, which will be managed by UBS.

Zip has a market valuation of $3.65 billion compared with Afterpay’s valuation of $29 billion. Westpac is worth $66 billion.

On Tuesday, Afterpay co-founder and chief executive Anthony Eisen said using Westpac’s “banking-as-a-service” platform will not only help it offer its customers a different way to manage their finances but also get a deeper understanding of their spending habits.

The deal enables Afterpay to further scale its business by broadening its services and gain access to crucial user data without needing a licence from the Australian Prudential Regulation Authority (APRA) to offer the accounts or needing to hold additional regulatory capital.

Meanwhile, competition regulator Rod Sims said he would press the federal government for tougher anti-merger laws that include stopping the big banks from buying emerging fintechs.

Market Recap

A concise wrap of the day on the markets, breaking business news and expert opinion delivered to your inbox each afternoon. Sign up for the Herald‘s here and The Age‘s here.

Most Viewed in Business

Source: Thanks smh.com