Digital payments giant Square says it has agreed to acquire Australian buy now, pay later (BNPL) pioneer Afterpay in a deal worth $39 billion, marking one of the largest local fintech sales of all time and a turning point for the global credit alternative sector.
In a joint Monday announcement, the companies said the all-stock deal would bring Afterpay into Square’s larger stable of peer-to-peer and merchant transaction capabilities.
The US-based Square said Afterpay’s BNPL functionality will be added to the Square Seller and Cash App ecosystems, allowing small merchants access to the increasingly popular method of payment and allowing Afterpay users to manage their payments on the existing Cash App platform.
Afterpay co-founders and co-CEOs Anthony Eisen and Nick Molnar said the deal aligns with the company’s international ambitions.
“By combining with Square, we will further accelerate our growth in the U.S. 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,” they said.
Both Molnar and Eisen will join Square under the deal to work on the company’s merchant and consumer businesses, respectively. One of the two will be appointed to the Square board.
Afterpay’s board has unanimously recommended the deal to shareholders, according to the statement.
The move marks an inflection point for Afterpay, and by extension, the broader BNPL market.
While Afterpay has successfully accrued 16 million consumers worldwide under its own steam, the deal suggests further progress could rely on access to a broader suite of payment categories, which are already served by firms like Square.
The deal also promises some immediate returns for investors, with existing Afterpay investors to be granted 0.375 shares of Square Class A common stock for every unit of Afterpay they hold.
Based on the July 30 closing prices of both Square and Afterpay, that deal will provide an effective premium of 30.6% for Afterpay shareholders; based on the 30-day volume weighted average, the premium will sit at 10.5%.
Square will offer a secondary listing on the ASX, allowing Australian-based investors to choose between shares listed on the NYSE or the domestic bourse.
Afterpay shareholders are expected to own 18.5% of the company once the deal is enacted, with an expected completion in the first quarter of the 2022 calendar year.