US payments firm Square is set to buy Australian Buy Now, Pay Later (BNPL) firm Afterpay for $29 billion.

The all-stock acquisition values Afterpay’s shares at $92.65 each and represents a 30 per cent premium on the firm’s last close.

The deal is expected to close in the first quarter of 2022, subject to regulatory approvals and the approval of shareholders of both companies.

Afterpay - founded in 2015 – claims to serve more than 16 million consumers and nearly 100,000 merchants globally, including major retailers in fashion, homewares, beauty, and sporting goods.

Square – founded in 2009 by Twitter chief executive Jack Dorsey and Jim McKelvey - is currently valued at around $100 billion and provides a point-of-sale (POS) solution which enables vendors to accept credit and debit cards and set up online stores.

The news comes after PayPal entered the Australian BNPL market in July, which sent shares of local BNPL players including AfterPay and Zip Co. lower.

The value of BNPL transactions by companies listed on the Australian Stock Exchange (ASX) grew by around 55 percent between 2019 and 2020 and has tripled since 2017 according to statistics from the Reserve Bank of Australia.

Square will establish a secondary listing on the ASX as part of the deal and Australian shareholders will own roughly 18.5 per cent of Square after the deal is finalised.

BNPL may be attracting more attention from BigTech; unconfirmed sources reported by Bloomberg indicated that Apple is planning to launch a Buy Now, Pay Later (BNPL) service in July.

“Square and Afterpay have a shared purpose. We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles,” said Jack Dorsey, co-founder and chief executive of Square. “Together, we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers, putting the power back in their hands.”

“By combining with Square, we will further accelerate our growth in the U.S. and globally, offer access to a new category of in-person merchants, and provide a broader platform of new and valuable capabilities and services to our merchants and consumers,” said Anthony Eisen and Nick Molnar, Afterpay co-founders and co-chief executives. “We are fully aligned with Square’s purpose and, together, we hope to continue redefining financial wellness and responsible spending for our customers.”

They added: “The transaction marks an important recognition of the Australian technology sector as homegrown innovation continues to be shared more broadly throughout the world.”

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