Xero is on the hunt for new acquisitions and plans to raise US$300 million through an issue of convertible notes in Singapore.
The accounting software developer also expects to break even on a cashflow basis in the March 2019 year, excluding merger and acquisition activity, with any surplus ploughed back into the business. Xero has already started putting its feelers out for potential acquisitions, having bought Canada’s Hubdoc in August for up to US$70 million. Now it’s planning to build a war chest for other investments.
Chief executive Steve Vamos says the company will sell the convertible notes through a subsidiary and list them on the Singapore-based exchange SGX. Xero quit the NZX earlier this year, although it retained its Wellington headquarters and Australian stock exchange listing.
The notes will be settled for cash in October 2023 at a 30 percent premium over the reference share price unless Xero opts to issue shares instead. The interest rate on the notes hasn’t yet been set.
The company also has a $100 million stand-by banking facility with BNZ and ANZ to draw on for M&A, which will focus on strategic and complementary businesses and assets, . Xero said it doesn’t have any agreements or understandings lined up.
“We see the additional financial flexibility provided by this offering as supporting the significant opportunity we have to enhance and extend Xero’s small business platform and ecosystem capabilities through the pursuit of complementary targeted acquisitions,” chief executive Steve Vamos says.
Xero listed on the NZX in 2007 at $1 and left at $34 in February this year. The shares are now tradiing on the ASX at just under A$50.
Vamos says the company is comfortable with analyst forecasts for 2019 revenue of between $528 million and $558 million and earnings before interest, tax, depreciation and amortisation of $66 million to $94 million.