BUZZ Zip, Sezzle plunge on likely U.S. rate hikes; Citi questions M&A benefits

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** Zip Co Ltd (Z1P.AX) and Sezzle dive more than 8% each as the U.S. Federal Reserve signals upcoming rate hikes

** Zip is currently in talks to buy U.S-based Sezzle in a deal that Citi has questioned, pointing to some overlap and being expensive to add new users

** Citi cuts its PT on Zip to A$3.65 from A$5.85, maintains "neutral"

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** Both companies have lost more than half their value since August as competition from well-funded rivals and more household names build; made worse is the global trend toward monetary tightening, eating into sky-high valuations of tech stocks

** Zip falls as much as 9.7% to A$2.9, while Sezzle drops 8.9% to A$2.14

** Citi says a deal would help Zip scale up in the U.S. but won't change its enterprise retailer penetration much to begin with

** A combination would still see Zip trail Block's (SQ.N) Afterpay, PayPal (PYPL.O) and Affirm (AFRM.O) in customer numbers, but leapfrog Afterpay in merchant base to only be behind Affirm - Citi

** Says it may be better to strike equity deals with enterprise retailers in the U.S. instead than buying Sezzle

** However, adds consolidation is a positive for industry profitability

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Reporting by Nikhil Kurian Nainan and Sameer Manekar

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