Afterpay Ltd (ASX: APT) shares are up almost 5% after the buy now, pay later business said it was going to expand into Europe.
Afterpay’s Europe expansion
Afterpay’s subsidiary, Clearpay, is going to acquire Pagantis and PMT Technology.
Afterpay said it’s going to accelerate its growth and increase its global footprint. The European Union is the next logical step for international growth due to its large ‘millennial’ population, large fashion and beauty retail markets and significant debit card usage.
The buy now, pay later business disclosed that the addressable ecommerce market in the EU exceeds €300 billion.
Pagantis is a provider of BNPL services as well as traditional credit across Spain, France and Italy with regulatory approval to operate in Portugal. The addressable market in these four countries is more than €150 billion.
Management believe the acquisition will de-risk the launch of the Clearpay-branded platform across the EU market with a targeted launch of FY21’s third quarter.
Pagantis has 1,400 active merchants and 150,000 active customers. The current fixed cost base is around €8 million per year.
Planned changes
Pagantis will be switched to Afterpay technology with the Clearpay brand. The company’s existing customer fee instalment and credit card offerings will be discontinued after the acquisition. The existing loan book will be retained by NBQ – the seller – and is excluded from the transaction.
NBQ will receive at least €50 million for Pagantis. It will also receive other payments if the value of Pagantis reaches certain levels.
Is this a good buy?
Afterpay CEO and Managing Director Anthony Eisen said: “Our momentum to date has given us the confidence to expedite our expansion into new global regions. Entering into such international relevant markets like the US and UK and seeing our growth outpace what we experienced in our more mature Australian market, validates the appeal of our product on a global scale.
“Acquiring Pagantis provides us with the necessary regulatory licencing, resourcing and infrastructure to expedite the launch of Afterpay into key countries in Southern Europe and beyond.
“The new markets we will be entering will provide our global retails with the opportunity to offer Afterpay in more regions and for us to provide a whole new customer base with access to our differentiated and customer centric model.”
Management seem excited by the deal and I think it seems like a good move. Europe has a population size fairly similar to the US – it’s a big opportunity.
Afterpay will likely be investing heavily to grow in Europe, so the date of the company reporting a net profit is now probably further away again. But the Afterpay share price just keeps going up. Afterpay is taking on the world, but there are other ASX growth shares I’d rather buy first like Pushpay Holdings Ltd (ASX: PPH).
