(Reuters) -- Australian buy-now-pay-later (BNPL) company Zip dropped its plan to buyout U.S. rival Sezzle, the companies said on Tuesday, adding to the list of fallen deals as rising interest rates hurt consumer finance companies.
As part of terminating the deal, which is effective immediately, Sezzle would receive $11 million from Zip, the companies added in a joint statement.
BNPL companies have seen their market value rapidly shrink over the past months as interest rate hikes to tame supercharged inflation fueled concerns about a slowdown in consumer finance.
This has led Australia's Latitude Group to pull back its buyout offer for Humm's BNPL business, and fellow BNPL company Openpay to pause its operations on the U.S. market.
Zip cited "current macroeconomic and market conditions" as a reason for pulling away from the deal, after saying in June "the acquisition of Sezzle remains on track."
The Australian BNPL company added that it continued to expect to deliver group profitability during fiscal 2024.
"We remain dedicated to driving toward profitability and free cash flow and believe this [deal termination] is the best outcome for our shareholders," said Charlie Youakim, CEO of Sezzle.
Sezzle, which was valued at 491 million Australian dollars ($330.34 million) by Zip while announcing the buyout in February, lost nearly 82% of its value to AU$84.9 million, as of Monday's close.
