Bill Holdings (BILL) shares fell 9% in early New York trading on Thursday after Bloomberg News reported that the financial-automation software provider is in advanced talks to acquire digital payment tools provider Melio Payments.
The potential deal values Melio at $1.95 billion in cash and stock, marking a significant decrease from its $4 billion valuation in 2021 after a $250 million investment round co-led by Thrive Capital and General Catalyst.
Analysts at BofA weighed in on the rumor.
“We see positives and some offsetting risks associated with a potential Melio acquisition. On the positives, Melio’s freemium offering could provide an on ramp to Divvy and BILL customers. Additionally, the potential acquisition could widen the total addressable market for BILL to an estimated $10 billion at that end of the market,” the analysts said.
“On negatives, a potential deal could be dilutive to margin. With a freemium model and down market focus, it is unlikely that Melio’s margin is higher than our estimate for BILL of 10% in FY24,” the analysts added.