• Xero to acquire leading US SMB bill pay platform Melio for US$2.5 billion
• Acquisition aligns with Xero's 3x3 strategy, step changing US customer proposition and scale
• Transaction to be funded through a combination of equity, scrip, debt and cash

Xero Limited (ASX: XRO) announced it has entered into a binding agreement to acquire 100% of Melio Limited and its associated entities (collectively Melio) for an upfront consideration of US$2.5 billion (A$3.9 billion). Melio is a leading US SMB bill pay platform that seamlessly integrates Accounting and Payments. The acquisition aligns with Xero's 3x3 strategy, delivering a step change in Xero's US value proposition and scale. The upfront consideration will be funded through a combination of a fully underwritten A$1.85 billion (US$1.2 billion) institutional placement, ~US$0.36 billion of Xero scrip issued to existing Melio shareholders, a fully underwritten US$0.4 billion unsecured revolving credit facility, and US$0.6 billion of existing cash on Xero's balance sheet. Additional contingent consideration, deferrals and rollovers of up to US$0.5 billion is payable to Melio employees over three years. The combined business is expected to significantly accelerate US revenue growth and give Xero the opportunity to more than double its FY25 group revenue in FY28 excluding anticipated revenue synergies. Xero expects to continue generating positive cash flow following the transaction, facilitating a meaningful deleveraging profile.

The combined business is expected to significantly accelerate US revenue growth and give Xero the opportunity to more than double its FY25 group revenue in FY28 excluding anticipated revenue synergies of ~US$70 million.

Xero is not updating its existing FY26 operating expense to revenue guidance as part of this announcement. That FY26 guidance excludes any impacts of the acquisition, including transaction costs. Xero will provide an update in relation to any impact of the acquisition upon completion.