Square is buying Afterpay for $39 billion

Jack Dorsey’s payments platform Square is buying ASX-listed Australian fintech Afterpay Ltd (ASX: APT) in a deal worth US$29 billion (A$39bn).

Anthony Eisen and Mick Molnar, co-founders of the buy now, pay later (BNPL) platform will join Square when the deal goes through early in 2022. They will help lead Afterpay’s respective merchant and consumer businesses.

The takeover will see Afterpay shareholders receive 0.375 Class A Square shares for every $APT share they own.

NYSE-listed Square closed at $247.26 last week. Afterpay shares ended the week $96.66. The offer represents an implied transaction price of approximately A$126.21 per Afterpay share, a premium of approximately 30.6% to Friday’s closing price. Square may elect to pay 1% of total consideration in cash.

The Afterpay board has unanimously backed the sale via a scheme of arrangement, along with the Square board.

Eisen and Molnar said the merger with Square will accelerate Afterpay’s growth in the U.S. and globally.

“We are fully aligned with Square’s purpose and, together, we hope to continue redefining financial wellness and responsible spending for our customers,” they said.

“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.”

Square CEO and co-founder Jack Dorsey said the companies have a shared purpose and the acquisition will accelerate Square’s strategic priorities for its Seller and Cash App ecosystems, with Afterpay integrated into those business units. That will give all Square merchants the ability to offer BNPL services at the checkout.

“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,” he said.

“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.”

Square’s Cash App business lead Brian Grassadonia said: “Afterpay will help deepen and reinforce the connections between our Cash App and Seller ecosystems, and accelerate our ability to offer a rich suite of commerce capabilities to Cash App customers.”

Afterpay serves more than 16 million consumers and nearly 100,000 merchants globally having recently refreshed its branding and with plans to rebrand its European arm, Clearpay, as Afterpay. Square has more than 70 million annual transacting active Cash App customers and millions of sellers.

The merger will see Afterpay expand Cash App’s growing product offering, enable customers to manage their repayments, and help customers discover new merchants when the Afterpay App is integrated into Cash App.

Afterpay consumers will receive the benefits of Cash App’s financial tools, including money transfer, stock and Bitcoin purchases, Cash Boost, and more.

Square believes Afterpay will be accretive to gross profit growth with a modest decrease in Adjusted EBITDA margins expected in the first year after completion of the transaction.

One Afterpay director will join the Square Board once the merger goes through.

Square has agreed to establish a secondary listing on the Australian Securities Exchange (ASX) to allow Afterpay shareholders to trade Square shares via CHESS Depositary Interests (CDIs) on the ASX.

Afterpay shareholders will be able to elect whether to receive the scheme consideration in NYSE listed Square Class A common stock or CDIs.

The CDIs listed on the ASX are expected to be eligible for S&P index inclusion in Australia.

Afterpay shareholders are expected to own approximately 18.5% of the combined company when the deal goes through.

Afterpay was founded by Nick Molnar and Anthony Eisen in Sydney in 2014 before listing on the ASX two years later.

It launched in the US in 2018, and then in the UK in 2019 as Clearpay. The business then moved into Europe in 2021.