The shareholders of Square—the payments firm of Twitter’s Co-founder Jack Dorsey—have approved the issuance of new shares for the U.S. company’s $29 billion purchase of Australian buy now, pay later firm Afterpay Ltd.
The purchase, which is aimed at creating an international transactions giant, is part of Square’s attempt to tap into the booming instalment loan market. Furthermore, the purchase by Square underlines the growing popularity of an industry that has upended traditional consumer credit.
Talks between the two companies began more than a year ago, and in August this year, the acquisition deal was finally announced. As at the time of the all-stock acquisition deal announcement by Square, Jack Dorsey, the company’s Chief Executive Officer 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.”
Founders of Afterpay also said at the time that the deal marked “an important recognition of the Australian technology sector as homegrown innovation continues to be shared more broadly throughout the world”. Trust Securities analysts added that the acquisition of Afterpay was “a ‘proof of concept’ moment for buy now, pay later, at once validating the industry and creating a formidable new competitor for Affirm Holdings Inc, PayPal Holdings Inc and Klarna Inc.”
Founded in 2014, Afterpay has been at the forefront of the buy-now-pay-later sector whose popularity burgeoned during the pandemic, as more people chose to pay in instalments for everyday items. Buy-now-pay-later firms lend shoppers instant funds, which can be paid in instalments with no interest. The loose regulation, burgeoning popularity and quick uptake among users have led to rapid growth in the sector, with other major companies joining the bandwagon.
Together with Afterpay, Square plans to deliver even more compelling products and services for merchants and consumers, “putting the power back in the hands of the consumers and merchants.”
According to Afterpay, the first court hearing for the deal is expected to take place today, and the acquisition is likely to close in the first quarter of next year. Its shareholders are set to receive 0.375 of Square class A stock for each unit held, implying a price of A$126.21 per share at the time of the announcement in August.