Afterpay overcomes final hurdle for multi-billion dollar merger with Jack Dorsey’s Block

Afterpay overcomes final hurdle for multi-billion dollar merger with Jack Dorsey’s Block

A multi-billion dollar merger of Australian buy-now pay-later (BNPL) giant Afterpay (ASX: APT) and the parent company of payments platform Square is now as good as done, after the Bank of Spain gave its blessing to the deal.

The Bank’s approval means the merger of Afterpay and tech billionaire Jack Dorsey's Block, Inc (NYSE: SQ) will go ahead, and comes after the Supreme Court of New South Wales gave the deal the green light and the Australian company’s shareholders voted overwhelmingly in favour of the milestone merger late last year.

"Afterpay, its leadership and team have shown that groundbreaking fintech innovation built in Australia can reach global proportions. The team are incredibly excited at the prospect of beginning an extraordinary next phase with Block, Inc. and look forward to implementation on 1 February 2022," Afterpay chair Elana Rubin said.

"On behalf of the Board and management, thank you to our shareholders, customers, merchants, broader stakeholders and regulators, for recognising the potential of this incredible company and for sharing in the vision of fairness and financial freedom for all.”

Approval from the Bank was a necessary box to tick for Afterpay which, via its UK-based subsidiary Clearpay, bought Spanish payments services business Pagantis in August 2020 for €50 million.

That deal gave APT an inroad to the European market, as it provided the Australian giant with a licence to operate across the European Union.

This long-awaited moment is more than six months in the making for Afterpay which first announced the deal with Block, Inc (formerly Square) back in August 2021 - worth $39 billion at the time.

Since then, shares in SQ have dropped, and with them the value of the deal as the acquisition will be paid in Block, Inc. shares.

When the deal was announced on 2 August, SQ shares were trading at USD$272.38 per share, but as of 11 January 2022 one share in the US fintech is worth just USD$148.43, representing a decline of about 45 per cent.

As such, at the current SQ share price, the acquisition is worth around $22 billion.

The deal will tie up the two companies, giving Block’s Square access to Afterpay’s industry-changing BNPL technology, its massive international cohort of customers which totalled around 16 million people as of November 2021, and its merchant base of more than 100,000 retailers globally.

Afterpay’s co-founders and co-CEOs Anthony Eisen and Nick Molnar will join Square upon completion of the transaction and help lead Afterpay’s respective merchant and consumer businesses as part of Square’s Seller and Cash App ecosystems. Square will appoint one Afterpay director as a member of the Square Board following closing.

In addition, as part of the Scheme Implementation Deed, Block has agreed to establish a secondary listing on the Australian Securities Exchange (ASX) to allow Afterpay shareholders to trade Block shares via CHESS Depositary Interests (CDIs) on the ASX.

Afterpay shareholders will be able to elect whether to receive the scheme consideration in NYSE listed Block Class A common stock or CDIs. The CDIs listed on the ASX are expected to be eligible for S&P index inclusion in Australia.

APT shares will be suspended from trading on 19 January, and trading of New Block CDIs on the ASX under the ticker SQ2 will commence one day later.

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