Westpac Group has offloaded its 10.7% stake in fintech Zip Co Limited (ASX: Z1P) in a deal that should net the bank around $300 million in profit.
The sale comes 24 hours after the bank announced a collaboration with Afterpay that will see the rival BNPL service offer a savings account and other cashflow management tools to its 3.3 million customers in Australia through Westpac’s new digital banking platform.
The shares will be offloaded via a fully underwritten book build to institutional investors at $6.65 per share, a discount of 6.07% to Zip’s closing price of $7.08 on Wednesday.
Westpac initially made a $40 million equity investment in Zip in 2017, followed up by $8.9 million in 2019. The sell-down is worth more than $367 million.
The bank said offloading the shares is about “simplifying its business and ensuring the efficient use of capital” and will add 8 basis points to Westpac’s common equity tier 1 capital ratio.
Westpac Chief Information Officer, Gary Thursby said the bank is “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”.
“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,” he said.
Settlement on Westpac’s Zip stake is expected on October 26.
The announcement of the sale came on the same day the Federal Court approved the deal struck between Westpac and the Australian Transaction Reports and Analysis Centre (AUSTRAC) for the bank to pay a $1.3 billion fine for its breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act, a record civil penalty in Australia.