Australian Stock Exchange-listed buy-now-pay-later company Afterpay will be bought out by US fintech giant Square for A$39bn.
Digital transactions and point of sale business Square said on Monday it had agreed to purchase the company in an all-stock deal worth US$29bn. Afterpay shareholders will get 0.375 shares of Square class A stock for every share they own, or around a price of A$126.21 per share based on Square’s Friday close.
It is around a 30% premium to Afterpay’s last close, and Australian shareholders would own about 18.5% of the combined company. Afterpay’s board unanimously recommended the deal.
Afterpay is the lead company of a burgeoning online payments sector allowing people to pay for their purchases in instalments. The takeover is seen as Square targeting the traditional credit market.
“The addition of Afterpay to Cash App will strengthen our growing networks of consumers around the world, while supporting consumers with flexible, responsible payment options,” said Brian Grassadonia, the lead of Square’s Cash App business.
The two companies said on Monday the deal would create an online payments powerhouse, and help accelerate Afterpay’s growth in the US.
“Square and Afterpay have a shared purpose ... Together, we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers,” Square’s chief executive, Jack Dorsey, said.
The transaction is expected to be completed in the first quarter of 2022. The company’s Australian co-founders and co-CEOs, Nick Molnar and Anthony Eisen, will join Square after the transaction is completed and will lead Afterpay’s merchant and consumer businesses as part of Square’s Seller and Cash App systems.
The buy-now-pay-later market has significantly grown in Australia in the past 18 months, leading to calls – resisted by the industry – for it to be more tightly regulated.
It still only accounts for around 1% of payments, however.
Afterpay and rival ZipCo’s share price tumbled in Australia last month when US payments giant PayPal announced plans to launch its Pay in 4 product to allow people to pay in four instalments. Apple is also reportedly looking at launching a similar products, and Commonwealth Bank will launch its product this month.