Square bags buy now, pay later firm Afterpay for $29 bln
Square Inc (SQ.N) on Monday said it has agreed to purchase buy now, pay later (BNPL) pioneer Afterpay Ltd (APT.AX), offering a 30% premium in a share-swap deal that is set to be Australia’s biggest-ever buyout. read more
The following are market watchers’ quotes on the deal.
WILSONS ADVISORY AND STOCKBROKING
Square’s all-scrip A$39 billion bid (A$126.21/share) marks the potential for Afterpay to achieve an increasingly rapid acceleration in its global trajectory.
Given the nature of the Square business and their Merchant and Consumer ecosystem, we see few realistic competing suitors beyond the major technology giants…
Now that Australia-New Zealand has fallen behind the United States in terms of group contribution, we believe Afterpay would likely face limited regulatory headwinds.
Few other suitors are as well-suited as Square. With … PayPal already achieving early success in their native BNPL, other than major U.S. tech-titans (Amazon.com Inc (AMZN.O), Apple Inc (AAPL.O)) lobbying an 11th hour bid, we expect a competing proposal from a new party to be low-risk.
UBS
The implied valuation of Square’s offer is materially above our price target, but is almost perfectly in line with the consensus price target (FactSet) for Afterpay of $125.99. UBS does not cover Square, though we highlight that the consensus price target for Square is $281.76, which based on the fixed exchange ratio of 0.375 and the same foreign exchange assumption that Afterpay is using, would imply a A$143.82 valuation per Afterpay share.
RBC CAPITAL MARKETS
As investors have been wondering what the ‘Killer App’ was going to be to link Square’s two ecosystems more meaningfully together, it would appear that fully integrating BNPL (via Afterpay) into and between Cash App and Seller is the answer.
TRUIST SECURITIES
At first blush, we contend acquiring Afterpay is a “proof of concept” moment for BNPL, at once validating the industry and creating a formidable new competitor for Affirm Holdings Inc (AFRM.O), PayPal and Klarna Inc…
We expect Square will invest heavily to integrate Afterpay and accelerate organic revenue growth.
EMANUEL DATT, FOUNDER, DATT CAPITAL
It’s a really market-defining transaction. It’s literally the largest corporate transaction in Australian history. It really moves the needle and validates the work that Afterpay has been doing from a valuation point of view.
EVANS & PARTNERS LTD
We view Square’s all-stock acquisition of Afterpay as transformational, as it enables two of the world’s trailblazing payments disruptors to come together to further augment the platform and relegate old-world retail banks. Afterpay now has the formidable financial weight and imagination of Silicon Valley behind it.
COWEN & CO LLC
Square’s entry into the BNPL space will likely come as no surprise to most investors… Instead the debate will revolve around the decision to buy versus build, given Square’s success in rolling our internally developed offerings and the path taken by fellow super-app developer Paypal…
We note … Afterpay boasts a scaled global BNPL business which would be difficult if not impossible for Square to replicate longer-term.
KEEFE, BRUYETTE & WOODS INC
While the acquisition is not cheap, we think the deal makes strategic sense as Afterpay complements both Square’s merchant and consumer ecosystems. We also believe Afterpay’s exposure to non-U.S. merchants and consumers provides Square with the ability to more cost effectively build out exposure internationally. Lastly, the combination provides Square with a stronger moat around its business model by adding additional products to new and existing consumers and merchants, accelerating the flywheel effect for the company.
STEVEN NG, SENIOR PORTFOLIO MANAGER AT OPHIR ASSET MANAGEMENT AND AFTERPAY INVESTOR SINCE MID-2017
I think this is a recognition that BNPL will be an enduring payment method so the big players in the payments space want to make sure they are exposed…
Time will tell whether any more come to the table. There are many other potential suitors – some quite logical – but it may also flush out some left field ones as well…
I think payments providers are increasingly seeing BNPL is an offering amongst a suite of products, rather than just a standalone product in itself.
The takeover makes sense for both sides. It’s a big multiple buying another big multiple to deliver most market/client exposure.
Afterpay management selling at a discount to February high after pitching the growth outlook potential suggests we may be near the peak in the fintech optimism.
I am not expecting a counter offer for Afterpay but it does flag the industry consolidation in BNPL has started.
MIZUHO SECURITIES USA
We see acquiring Afterpay as an important step, opening Square up to the global $10 trillion online payments total addressable market, adding $32 in average revenue per user, and helping Square create a closed-loop payment rail system backed by Bitcoin and decentralised finance…
We believe Afterpay makes long-term fundamentals stronger, as Square inches closer to becoming the JPMorgan Chase & Co (JPM.N) of the future.
BARCLAYS CAPITAL
For a couple of years now, Square management has increasingly discussed a longer-term goal to unite the Seller and Cash App ecosystems, and we think the proposed Afterpay acquisition fits very well into that plan.
