Square inc (NYSE:SQ) (NYSE: SQ), the payments company run by Twitter Inc (NYSE:TWTR) boss Jack Dorsey, has struck a deal to acquire ‘buy now pay later’ firm Afterpay in an all-stock transaction that will become the largest takeover in Australia’s history.
The company is offering Afterpay investors 0.375 Square shares for each share they own in the Melbourne-based firm, a 30% premium based on the July 30 closing price of both companies and valuing Afterpay as a whole at around US$29bn.
In a joint announcement on Monday, the two firms said the transaction is due to be completed in the first quarter of 2022 and will aim 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,” Dorsey said in a statement.
“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,” added Afterpay’s co-founders and co-CEOs Anthony Eisen and Nick Molnar.
Bitcoin profit boom
News of the takeover also came hot on the heels of Square’s results for its second quarter, in which the company reported adjusted earnings per share (EPS) of US$0.66, more than double analyst predictions of US$0.31.
The company’s performance was boosted by a massive boom in revenues from its Bitcoin operations, which soared 200% year-on-year to US$2.72bn while gross profits surged to US$55mln from US$17mln.
The increase was driven by increases in customer demand for the digital currency as well as price surges in crypto markets earlier in the year. However, the firm also reported that Bitcoin revenues and gross profits fell compared to the first quarter as sharp falls in price hit trading demand, which in turn produced a US$45mln impairment loss against the company’s Bitcoin holdings.
Square also warned that its Bitcoin business could see further fluctuations in coming quarters due to the volatile nature of the market.
Square shares were down 3.5% at US$247.26 in pre-market trading in New York on Monday, while Afterpay was up 18.8% at A$114.80 in late afternoon deals on the Australian Stock Exchange.