Square intends to acquire Australian fintech company Afterpay for $29 billion in stock, with the transaction expected to completion in Q1 2022.
Due to its acquisition of a big Australian loan company, Jack Dorsey’s cryptocurrency-friendly digital payments firm Square is increasing its battle with global payment giants such as PayPal and Visa.
According to Square’s announcement on Sunday, the company has entered into a plan implementation agreement to buy all of the issued shares in fintech company Afterpay in a $29 billion transaction. The transaction is based on the closing price of Square’s common stock on the day of the transaction, and it is expected to be settled in full in the first quarter of 2022.
Square’s strategic goals for payment ecosystems will be further advanced as a result of the acquisition, as the company wants to incorporate Afterpay into its Seller and Cash App business divisions in order to provide a “buy now, pay later” (BNPL) solution.
BNPL transactions, which are also known as instalment loans, allow clients to pay a bill in small amounts over a certain period of time. Global financial institutions such as PayPal, Mastercard, Klarna, Citi, and others have been at the forefront of this innovation.
Following the announcement, small businesses will be able to offer BNPL at checkout, allowing Afterpay customers to manage their instalment payments directly in Cash App as well as explore BNPL offers immediately within the app. The integration represents a significant step forward for Square in its efforts to fulfil growing customer demand for alternatives to traditional credit.
Square co-founder and CEO Dorsey stated that the acquisition will assist the firms in achieving their common goal of making the financial system more open, fair, and inclusive for all people and businesses. In addition, he stated that by working together, they can “improve the connectivity of our Cash App and Seller ecosystems in order to deliver even more compelling products and services to merchants and consumers, putting the power back in their hands.”
As part of the deal, Afterpay’s co-founders and top executives will join Square and will assist with the leadership of Afterpay’s related merchant and consumer businesses inside Square’s Seller and Cash App ecosystems, as well as the development of new products and services. Following this agreement, Square has also agreed to establish a secondary listing on the Australian Securities Exchange (ASX), which would enable Afterpay owners to trade Square shares through CHESS depositary interests on the ASX.
The announcement comes as Square reports a significant increase in second-quarter earnings, including a 200 percent increase in Bitcoin (BTC) sales. Square’s Bitcoin services created a gross profit of $55 million, representing a 223 percent increase year on year, while the Cash App made a gross profit of $546 million, representing a 94 percent increase year on year.
