Square to acquire Afterpay in an all-stock deal worth $29 bn

American financial services and digital payments company Square Inc has announced plans to acquire Australia-based Afterpay, the pioneering global 'buy now, pay later' (BNPL) platform, in a move that brings together two of the fastest growing global fintech companies.

The all-stock deal has an implied value of approximately $29 billion (A$39 billion) based on the closing price of Square common stock as of 30 July 2021.
Square Inc and Afterpay Limited have entered into a scheme implementation deed under which Square will acquire all of the issued shares in Afterpay by way of a recommended court-approved Scheme of Arrangement. 
Afterpay shareholders will get 0.375 of Square class A stock for every share they own, implying a price of A$126.21 per share based on Square's Friday close, the companies said. Afterpay shares closed at A$114.80, up 19 pe cent.
The buyout delivers a payday of almost A$2.5 billion ($1.8 billion) each for founders Anthony Eisen and Nick Molnar. China's Tencent Holdings Ltd, which paid A$300 million for 5 per cent of Afterpay in 2020, will pocket A$1.7 billion.
The acquisition aims to 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. The transaction is expected to close in the first quarter of 2022, subject to the satisfaction of certain closing conditions. 
“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 CEO 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,” he added.
Square plans to integrate Afterpay into its existing Seller and Cash App business units, enable even the smallest of merchants to offer BNPL at checkout, give Afterpay consumers the ability to manage their installment payments directly in Cash App, and give Cash App customers the ability to discover merchants and BNPL offers directly within the app. 
“Buy now, pay later has been a powerful growth tool for sellers globally,” said Alyssa Henry, Lead of Square’s Seller business. “We are thrilled to not only add this product to our Seller ecosystem, but to do it with a trusted and innovative team.” 
“The addition of Afterpay to Cash App will strengthen our growing networks of consumers around the world, while supporting consumers with flexible, responsible payment Afterpay Limited options,” said Brian Grassadonia, Lead of Square’s Cash App business. “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,” he added.
Afterpay is an industry leader with a best-in-class product and strong cultural alignment with Square. As of 30 June 2021, Afterpay serves more than 16 million consumers and nearly 100,000 merchants globally, including major retailers across key verticals such as fashion, homewares, beauty, sporting goods and more. Afterpay heps consumers access the things they want and need, while allowing them to maintain financial wellness and control. Afterpay also assists merchants in growing their businesses by helping to drive repeat purchases, increase average transaction sizes, and provide their buyers with the ability to pay over time. 
Afterpay supports consumers in a number of countries across APAC, North America and Europe (including under its Clearpay brand). 
"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,” said Anthony Eisen and Nick Molnar, Afterpay co-founders and Co-CEOs. 
“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,” they added 
For Square, BNPL presents an attractive opportunity supported by shifting consumer preferences away from traditional credit, especially among younger consumers, consistent demand from merchants for new ways to grow their sales, and the global growth in omnichannel commerce. Combined, Square and Afterpay’s complementary businesses present an opportunity to drive growth across multiple strategic levers.
The Afterpay board has unanimously recommends that Afterpay shareholders vote in favour of the Scheme of Arrangement for, stating among other things, that the consideration represents an attractive premium for Afterpay shareholders. Based on Square’s closing price of US$247.26 on 30 July 2021, this represents an implied transaction price of approximately A$126.21 per Afterpay share, and an attractive premium of approximately 30.6 per cent to Afterpay’s latest closing price of A$96.66. This represents an approximate 21.9 per cent premium over the 10-day volume weighted average Afterpay share price, and an approximate 10.5 per cent premium over the 30-day volume weighted average Afterpay share price, each as of 30 July 2021. 
Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay share. Following completion of the transaction, Afterpay shareholders are expected to own approximately 18.5 per cent of the combined company on a fully diluted basis.