Deal, Afterpay, Australia

Deal, Afterpay

The US$29 billion deal in 11 weeks: how Square bought Afterpay

The US$29 billion deal in 11 weeks: how Square bought Afterpay

3/8/2021 1:05:00 PM

The US$29 billion deal in 11 weeks: how Square bought Afterpay

Jack Dorsey introduced the world to expressing itself in just 140 characters as the creator of Twitter Inc, and his payments company, Square Inc, ...

BusinessJack Dorsey introduced the world to expressing itself in just 140 characters as the creator of Twitter Inc, and his payments company, Square Inc, also likes getting straight to the point.FILE PHOTO: The Afterpay app is seen on the screen of a mobile phone in a picture illustration taken August 2, 2021. REUTERS/Loren Elliott/Illustration

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03 Aug 2021 05:40PMShare this contentBookmarkSYDNEY/HONG KONG/NEW YORK: Jack Dorsey introduced the world to expressing itself in just 140 characters as the creator of Twitter Inc, and his payments company, Square Inc, also likes getting straight to the point.

Square's purchase of Australian buy now, pay later provider Afterpay Ltd for US$29 billion in stock, the largest ever acquisition by Dorsey's firm, was consummated within three months, said four people with knowledge of the deal talks.Advertisement headtopics.com

AdvertisementSuch a short time is regarded as uncommon in the world of huge cross-border M&As, where armies of advisers can spend months negotiating key terms and poring over books and business plans to ensure there are no hidden skeletons.As the business boomed in the past year, Afterpay fielded takeover interest from six potential buyers, including U.S. consumer banks, one of the sources said, but Square made more sense as the companies were already exploring services tie-ups.

Square wanted to provide a buy now, pay later feature for its popular Cash app, while Afterpay hoped to accelerate growth in the U.S. market, in competition with Affirm and Klarna.The deal talks for the largest buyout ever for an Australian firm started last year to explore a strategic partnership in response to growing competition from incumbents, and turned towards acquisition after key executives of the two firms met in Hawaii in May, three of the sources said.

AdvertisementAdvertisementThe executives left the tropical island after a couple of days with the agreement that they needed to be combined, the sources said, adding that it took just 11 weeks from that point to finalise the transaction terms.There were good reasons for the speed - banks and new entrants are aiming for a bigger slice of the buy now, pay later services that have boomed in the past year, as homebound consumers used them to borrow and spend online during the coronavirus pandemic.

The Australian firm's share price slumped 10per cent on July 14 on media reports that Apple Inc was working on a buy now, pay later feature in coordination with Goldman Sachs Group Inc.Such volatility put an emphasis on brevity. Shares in both companies reacted positively to the deal. headtopics.com

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AdvertisementOn Monday, Afterpay closed in Sydney up 18.76per cent, while Square climbed 10.15per cent in New York, despite the prospect of shareholders being diluted by the new shares to pay for the profitless Australian company. Afterpay rose a further 11.3per cent on Tuesday.

Spokespersons at Square and Afterpay declined to comment on the deal background. The sources declined to be named as they were not authorised to talk to the media.'PROJECT POCKET'Buy now, pay later firms lend shoppers instant funds, typically up to a few thousand dollars, which can be paid off interest-free. They generally make money from merchant commissions and late fees, rather than interest payments.

In this way, they sidestep the legal definition of credit and therefore credit laws.That means such providers are not required to run background checks on new accounts, unlike credit card companies, and normally request just an applicant's name, address and birth date. Critics say that makes the system an easier fraud target.

Executives at Square and Afterpay shared a desire to expand access to customers globally and saw combining forces as the best way to take on competitors, both present and potential, in the business, the sources said.Afterpay co-founder Nick Molnar first got to know Amrita Ahuja, chief financial officer at Square, years ago when he was living in the United States. Ahuja then introduced the Australian to Dorsey, said one of the sources. headtopics.com

The deal talks, internally named"Project Pocket", picked up pace after Afterpay engaged Goldman to explore a U.S. listing in April, said another, which was soon followed by Square showing an interest in buying the company.Soon after, Afterpay hired boutique Qatalyst Partners to evaluate the offer, with the option that if the deal fell through they would push ahead with the plan for the U.S. listing, said another person.

Sydney-based boutique advisory Highbury Partners was also retained by Afterpay's board.The Hawaii trip finally led to the conclusion that each had what the other wanted.For Square, it was Afterpay's expertise in buy now, pay later and its existing relationships with large merchants. And Afterpay envied Square's vast reach and popularity in the U.S. market.

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(Reporting by Krystal Hu in New York, Paulina Duran in Sydney and Scott Murdoch in Hong Kong, Writing by David French; Editing by Sumeet Chatterjee and Clarence Fernandez) Read more: CNA »

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Square to buy Australia's Afterpay for US$29 billionU.S. fintech company Square Inc said on Monday it had agreed to purchase Australia n buy now/pay later firm Afterpay Ltd for about US$29 billion.

Square to buy Afterpay for US$29 billion as buy now, pay later boomsU.S. fintech company Square Inc said on Monday it had agreed to purchase Australia n buy now/pay later firm Afterpay Ltd for about US$29 billion.

Fintech company Square to buy Afterpay for US$29 billion as buy now, pay later boomsU.S. fintech company Square Inc said on Monday it had agreed to purchase Australia n buy now/pay later firm Afterpay Ltd for about US$29 billion.

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Digital payment platform Square to buy Afterpay for $29 bnUS digital payment platform Square, founded by Twitter boss Jack Dorsey, announced Sunday it will acquire Australia 's Afterpay Limited for $29 billion. Afterpay specializes in the 'buy now, pay later' model that offers users staggered payments, often without extra charge.