Payments provider Klarna raises $650 million from Silver Lake-led investor group

STOCKHOLM (Reuters) - Swedish payments provider Klarna Bank AB said on Tuesday it has raised $650 million from investors led by Silver Lake, lifting its valuation to $10.65 billion, as it seeks to take on rivals such as PayPal PYPL.O and Australia's AfterPay APT.AX in the fiercely competitive U.S. market.

The spread of the coronavirus has led more people to shop online and use options like “buy-now-pay-later” in several interest-free instalments offered by the alternative credit firms.

Klarna launched a shopping app last year in the United States, which is set to become the company’s largest market by the end of the year as its customer base in the region grew about 550% in the first half of the year.

Technology investor Silver Lake contributed $500 million in the new funding round for less than a 5% stake, Klarna Chief Executive Sebastian Siemiatkowski told Reuters.

He said he had invested additional funds in Klarna. He did not disclose the amount.

Other investors include Singapore’s sovereign wealth fund GIC, funds managed by BlackRock and HMI Capital. Concurrently, Merian Chrysalis, TCV, Northzone and Bonnier have acquired shares from existing shareholders, the company said.

Reuters had reported about the potential fund-raising round last week, citing sources.

The company’s valuation is now nearly double the $5.5 billion valuation reached after a previous funding round last August.

Existing investors include rapper Snoop Dogg, Sequoia Capital, Dragoneer, Permira, Commonwealth Bank of Australia, Bestseller Group and Ant Group.

Founded in 2005, Klarna allows shoppers to buy online through its merchant partners and settle the dues in four instalments using its “buy-now-pay-later” (BNPL) service.

Klarna, which plans to list in New York in the next two years, reported its first annual loss earlier this year due to investments in the United States and the UK. The losses also jumped seven-fold in the first half of the year.

The new funding would be used for investments in the United States and for developing the company’s products for merchants and customers, Siemiatkowski said.

While Klarna and AfterPay have been vying to corner a bigger market share in the United States, payment processor PayPal has started offering its own BNPL service in the country.

Siemiatkowski brushed off stiffer competition, saying Klarna already competes with PayPal in the Nordics, Germany and the UK.

Reporting by Supantha Mukherjee in Stockholm, Editing by Sherry Jacob-Phillips and Susan Fenton