Square led by Jack Dorsey acquires Australia's top fintech company for 33 trillion won

Square to Acquire Australian Buy-Now-Pay-Later Company Afterpay for Approximately 33 Trillion Won
Largest Deal in Australian Corporate History

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Square, a U.S. fintech company led by Jack Dorsey, is acquiring Afterpay, Australia's number one Buy Now, Pay Later (BNPL) company, for approximately 33 trillion KRW. This marks the largest acquisition of an Australian company to date. The move is interpreted as an effort to secure a leading position in the rapidly growing BNPL market, especially among younger generations.

According to the Wall Street Journal (WSJ) on the 1st (local time), Square agreed to acquire all shares of Afterpay for about $29 billion (approximately 33.4 trillion KRW). Afterpay shareholders will receive 0.375 shares of Square Class A stock per Afterpay share, reflecting a 30% premium based on Afterpay's recent closing price. The deal is expected to be completed in the first quarter of 2022.

Upon completion, Afterpay shareholders are expected to own about 18.5% of the merged company. Square stated that it plans to integrate Afterpay into its 'Seller and Cash App' business unit to enable more retailers to offer BNPL services.

Afterpay is an Australian fintech company that has rapidly grown with its "buy now, pay later" business model. Afterpay's payment system allows users to pay only part of the price upfront and immediately purchase goods, then pay the remainder in four interest-free installments. Customers only pay fees if they miss automatic payments, and there is a cap on accumulated late fees to prevent debt from increasing. However, to filter out customers with a high likelihood of default, Afterpay uses big data to reject a significant number of payment requests.

Targeting the MZ generation, who fear financial services that increase debt like credit cards following the global financial crisis, Afterpay has grown into Australia's most valuable fintech company. It provides services in Australia, the United States, Canada, New Zealand, the United Kingdom, France, Italy, Spain, and other countries, boasting over 16 million users worldwide.

▲Jack Dorsey, founder and CEO of Twitter and Square [Image source=Reuters Yonhap News]

Jack Dorsey, CEO of Square, said, "Square and Afterpay share a common purpose. We have built a business to make the financial system more fair, accessible, and inclusive, and Afterpay is a trusted company that aligns with these principles."

Nick Molnar and Anthony Eisen, co-founders and co-CEOs of Afterpay, said, "Through the merger with Square, we will accelerate growth in the U.S. and global markets."

The background of Square's acquisition of Afterpay is interpreted as an effort to secure a leading position in the rapidly growing BNPL market centered on the MZ generation. In fact, BNPL demand surged during the COVID-19 pandemic. According to Adobe Analytics, BNPL system usage tripled as of early 2021 compared to before the pandemic. It is especially popular among young consumers who may not have much cash on hand but want to receive goods first and pay in installments. Users have surged in countries like Australia and Europe, where credit card issuance is difficult.

Neil Saunders, GlobalData Retail Director, explained, "Considering the rapid growth of the BNPL market, which is Afterpay's system, it is a natural step for Square to acquire Afterpay."

The approximately $29 billion deal is expected to be the largest in Australian corporate history. The previous largest deal was in 2017 when European real estate giant Unibail-Rodamco acquired shopping center operator Westfield Group for $20 billion. The Square-Afterpay merger is expected to surpass this record.