US payment giant Square buys Afterpay for $39 billion

  • By Elizabeth Fry

US payments giant Square has made a $39 billion scrip for buy now, pay later group Afterpay. 

According to the release, the two parties have agreed to an all-scrip deal, which will see Afterpay shareholders receive a fixed exchange ratio of 0.375 Square shares for each Afterpay share. 

The bid values the Aussie BNPL provider at $126.61 a share - a 30 percent premium to its share price at the close of trade on Friday. 

On completion of the deal, Afterpay shareholders will own 18.5 percent of the combined company. 

In a joint release, the two companies said that Square has agreed to establish a secondary listing on the Australian share market to allow Afterpay shareholders to trade Square shares. 

The deal is expected to close in the first quarter of 2022, subject to the satisfaction of certain closing conditions. 

According to Square, the acquisition will enable the companies to better deliver compelling financial products and services that expand access to more consumers and drive incremental revenue for merchants of all sizes.  

Square also said Afterpay will help deepen and reinforce the connections between its Cash App and Seller ecosystems. 

“Square and Afterpay have a shared purpose. We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles,” said Jack Dorsey, co-founder, and chief executive of Square.  

“Together, we can better connect our cash app and seller ecosystems to deliver even more compelling products and services for merchants and consumers, putting the power back in their hands.” 

The deal recognises Aussie technology 

The closing of the transaction is expected in the first quarter of calendar year 2022 subject to the satisfaction of certain closing conditions. 

Afterpay co-founders Anthony Eisen and Nick Molnar said in a joint statement: “The transaction marks an important recognition of the Australian technology sector as homegrown innovation continues to be shared more broadly throughout the world. It also provides our shareholders with the opportunity to be a part of future growth of an innovative company aligned with our vision.” 

“By combining with Square, we will further accelerate our growth in the US and globally, offer access to a new category of in-person merchants, and provide a broader platform of new and valuable capabilities and services to our merchants and consumers.” 

Square reported a second-quarter profit of US$1.14 billion - up 92 percent on the year earlier quarter. 

Both Eisen and Molnar will join Square upon completion of the transaction and help lead Afterpay’s respective merchant and consumer businesses. Square will appoint one Afterpay director as a member of the Square Board following closing.  

Citi analysts said they see the strategic value in Afterpay combining with Square’s Cash App and Seller ecosystem and see the combined business as being in a much stronger position to succeed, especially in the US.  

“However, given we are still early in the BNPL penetration story, we see the timing as surprising and also see the offer price as low,” they said.