Square announces plans to acquire Afterpay for US$29 bn

By Pavithra R

Square, building simple tools to help people participate and thrive in the economy, and Afterpay, a leading “Buy Now, Pay Later” (BNPL) service provider, announced entering into a Scheme Implementation Deed under which Square has agreed to acquire all of the issued shares in Afterpay by way of a recommended court-approved Scheme of Arrangement. The transaction is expected to close in the first quarter of 2022, subject to the satisfaction of certain closing conditions.

The transaction has an implied value of approximately US$29 bn (A$39 bn) based on the closing price of Square common stock on July 30, 2021, and is expected to be paid in all stock. 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 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. 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,” said Jack Dorsey, Co-Founder and CEO of Square.

Through the acquisition, Afterpay aims to accelerate Square’s strategic priorities for its Seller and Cash App ecosystems. Square plans to integrate Afterpay into its existing Seller and Cash App business units, enabling 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.

As of June 30, 2021, Afterpay serves more than 16 mn consumers and nearly 100,000 merchants globally, including major retailers across key verticals. Combined, Square and Afterpay’s complementary businesses present an opportunity to drive growth across multiple strategic levers, including:

• Enhance both the Seller and Cash App ecosystems. Afterpay’s global merchant base will accelerate Square’s growth with larger sellers and expansion into new geographies, while helping to drive further acquisition of new Square sellers.
• Bring added value, differentiation, and scale to Afterpay. Afterpay will benefit from Square’s customer base of more than 70 mn annual transacting active Cash App customers and millions of sellers, which will expand Afterpay’s reach and growth both online and in-person. Afterpay consumers will receive the benefits of Cash App’s financial tools, including money transfer, stock and Bitcoin purchases, Cash Boost, and more.
• Drive long-term growth with meaningful revenue synergy opportunities. 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.

“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. We are fully aligned with Square’s purpose and, together, we hope to continue redefining financial wellness and responsible spending for our customers. 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,” said Anthony Eisen and Nick Molnar, Afterpay Co-Founders and Co-CEOs.