Square offers 29 billion US dollars for Afterpay

Twitter co-founder Jack Dorsey is expanding his business with installment payments with the billion-dollar takeover of the Australian payment service provider Afterpay. Dorsey's Fintech Square offers 29 billion US dollars (the equivalent of around 24.4 billion euros) for Afterpay, as the companies announced. It is the largest takeover of an Australian company to date. "Together, we can better connect our cash app and seller systems to deliver even more compelling products and services to merchants and consumers," said Dorsey, who also runs Twitter. Afterpay is a pioneer in the BNPL ("Buy-Now-Pay-Later") business. For a fee, online retailers can offer their customers the option to pay off their purchases later in installments without interest. For this, Afterpay takes over the payment processing and also the risk of payment default. Because BNPL providers do not collect interest, but rather charge fees from the merchants, they circumvent the legal requirements for loans and are not obliged to check the creditworthiness of customers. Usually it is enough to give your name, address and date of birth in order to benefit from the installment payments. Such payment offers are popular with customers, the industry is growing rapidly, fueled by the increasing online demand in the pandemic. However, critics fear that the system is susceptible to fraud. The takeover is a test of the business model, wrote the analysts from the investment bank Truist Securities: At the same time, the industry will be assessed and a major competitor created for the top dogs Klarna and PayPal. Few other competitors were as good a match for Afterpay as Square, the experts at the securities house Wilsons Advisory and Stockbroking wrote: "PayPal is already having initial successes in its own BNPL business, and if not US giants like Amazon or Apple out of cover at the last minute come, the risk of a bidding war is low. " According to an insider, the two companies have been negotiating for more than a year and Square is confident there is no competing bid. Afterpay shareholders received 0.375 Square shares per share. According to the company, this corresponds to a price of around 78 euros (126.21 Australian dollars) per share, or a premium of around 30 percent. Today, Monday, the Afterpay papers went out of trading at 114.8 Australian dollars, just under a fifth higher. According to plans, Afterpay founders Nick Molnar and Anthony Eisen will remain in management after the takeover. The decisive factor in founding the company was the knowledge from the financial crisis of 2008 that younger people in particular avoided credit cards, Molnar said in a Reuters interview in 2020. Afterpay has been on the market since 2014 and is one of the 20 largest companies in Australia, but has not yet made a profit.