Square to acquire APT for $39b, page-27

Afterpay co-founder Nicholas Molnar says a $39 billion takeover from Square will turbocharge the payment company’s global expansion after he vowed to hang onto his stake in the merged group as it tries to disrupt the credit card business around the world.

In the largest corporate takeover in Australian history, Twitter billionaire Jack Dorsey’s US payments platform Square on Monday said it would buy Afterpay, creating a global fintech giant. The takeover, in which Afterpay shareholders will be paid in Square shares, will result in Square establishing a dual listing on the ASX.

Mr Molnar said merging with Square, which provides payment services to millions of small merchants and consumers, would allow Afterpay to accelerate its growth among Millennials in the US. Mr Molnar and co-founder Anthony Eisen, who each own about $2.3 billion in Afterpay shares, will join Square in senior management roles if the deal goes ahead.

When asked if he intended to retain his stake in the business, Mr Molnar replied: “Yeah, absolutely. Ant and I remain deeply committed for the long term.

“And actually an all-share transaction represents just that: an opportunity to, at a very fast growth moment in time for Afterpay’s business, to reach an inflection point to accelerate beyond this moment as a result of the platform that Square and cash app bring to the Afterpay equation.”

The record-breaking takeover is also a major vote of confidence in the booming buy now, pay later (BNPL) sector, which allows consumers to take out short-term instalment loans and has proven a hit with younger shoppers.

Mr Molnar said Afterpay’s home market of Australia represented a “really good blueprint of what’s possible” as BNPL services challenge credit cards around the world.

“In Australia we have one in three Millennials using our service every month, and we’re in the very early stages of our growth curve elsewhere,” Mr Molnar said in an interview, speaking from Los Angeles.

Investors backed the takeover, which was supported by Afterpay’s board and will go to a shareholder vote. Afterpay shares were up 20.2 per cent to $116.11 in afternoon trade.

Afterpay was started by Mr Molnar and Mr Eisen in 2014 and is the pioneer in the buy now, pay later space used by 16 million consumers and 100,000 retailers globally.

Square’s chief financial officer Amrita Ahuja argued the deal would be “transformative” for both companies, highlighting the rapid growth in BNPL, and the scope for it to expand much further into the payments sector.

An analyst at Holon Investments, Mark Roddy, said merging the two companies would create a “very compelling” business, and the deal should speed up the adoption of BNPL in the US.

“From an investor perspective, this acquisition makes a lot of sense. The ecosystem that they are going to have combined is much more valuable than each of them alone,” Mr Roddy said.

Mr Dorsey, chief executive of Square, said the two companies have a shared purpose and that connecting their respective apps would create better products for both consumers and merchants.

“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.

Under the terms of the deal, Afterpay shareholders will receive 0.375 shares of Square for each Afterpay ordinary share they hold.

Morningstar analyst Shaun Ler said it was “very highly probable” the deal would go through, as it had the blessing of Mr Molnar and Mr Eisen. While he questioned if Square was overpaying, he said that from Afterpay shareholders’ perspective combining the two companies made financial sense.

“It appears to be a good deal at the latest closing price,” Mr Ler said.

Evans and Partners analyst Matthew Wilson said the merger would bring together two of the world’s trailblazing payments disruptors, further ramping up competition with established banks. “[Afterpay] now has the formidable financial weight and imagination of Silicon Valley behind it,” Mr Wilson said.

The takeover also caps a remarkable recovery in Afterpay’s share price, which fell as low as $8.01 in the depths of 2020, before reaching a record high of $160.05 in February this year.

The deal will depend on regulatory approvals, and NSW Liberal Senator Andrew Bragg on Monday tweeted that he was very concerned about the consolidation among big technology players, payments firms, and financial services providers.