Jack Dorsey’s Square buys Afterpay in $29bn deal amid buy now, pay later boom

Twitter co-founder Jack Dorsey’s digital payments platform Square has acquired Australian ‘buy now, pay later’ firm Afterpay to create an online payments powerhouse and help accelerate Afterpay’s growth in the US.

The $29bn deal is set to be Australia’s biggest-ever buyout. The offer is a more than 30% premium to Afterpay’s stock market closing price.

The Australian Competition and Consumer Commission, which would need to approve the transaction, said it had just been notified of the plan and “will consider it carefully once we see the details”. The agreement will create an instalments payment giant as the industry sees significant growth.

Square co-founder Dorsey said, “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,”

The Australian firm said its board has unanimously recommended the deal to its shareholders, who are expected to own around 18.5% of the new company.

The takeover underscores the popularity of a business model that has upended consumer credit by charging merchants a fee to offer small point-of-sale loans which their shoppers repay in interest-free instalments, bypassing credit checks.

Afterpay has been seen as a key indicator of the prospects for the niche no-credit-checks online payments industry that jumped in popularity last year as more users, especially young people, opted to pay in instalments for everyday items during the coronavirus pandemic.

Founded in 2014 by Australians Nick Molnar and Anthony Eisen, Afterpay has more than 16 million customers and is used by 100 million businesses around the world. The agreement means that Afterpay will be able to expand more quickly in the US. Its latest annual figures showed sales in the US nearly tripled for the period to $8.15bn.

Afterpay shares were trading more than 20% higher in Monday’s trade in Sydney.

The huge popularity, swift uptake by users and relatively light-touch regulation has led to rapid growth of the buy now, pay later industry. Online payment players and FinTechs have been competing to launch their own version of BNPL products for online items in the low hundreds of dollars.

Affirm, PayPal, Klarna, Mastercard and Fiserv, American Express, Citi and JP Morgan Chase are all offering similar loan products. Apple is planning to launch instalment lending in a partnership with Goldman Sachs, that would allow shoppers to pay for purchases in instalments.

Square also announced its second-quarter results on Sunday, ahead of the previously planned release on Wednesday.

Gross profit increased 91% from a year ago, which marked a record quarterly growth rate for the payments company. Cash App profit was up 94%, while seller jumped 85% from a year ago. Net revenue excluding bitcoin came in at $1.96bn for the quarter, an 87% rise year over year.

In March this year, Square also acquired 80% ownership in Jay-Z’s music streaming service Tidal for $297m.

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