The Afterpay Ltd (ASX: APT) share price is in focus today because of a development with the Square (NYSE: SQ) deal.
Square approvals Afterpay deal
Afterpay confirmed this morning that Square Inc’s shareholders have approved the issuing of Square shares (including the underlying CHESS depositary interests) to Afterpay shareholders as the takeover deal was agreed.
One of the conditions for the deal going ahead between Afterpay and Square was the approval of Square investors, which has now been satisified.
Afterpay said that the first court hearing will be held today and that the scheme booklet is expected to be released tomorrow on 5 November 2021, subject to court approval and after registration with the Australian Securities and Investments Commission (ASIC).
The buy now, pay later business expects the transaction will close in the first quarter of 2022.
What is the deal?
Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square shares for each Afterpay share. The shareholders of Afterpay will own close to a fifth of Square if/when the deal goes ahead.
Based on Square’s closing price of US$247.26 at the time of the announcement, the deal represented an implied price of $126.21. That was a premium of approximately 30.6% to Afterpay’s last share price of $96.66. However, it only represented a 10.5% premium to the average price over the prior 30 days.
Afterpay is applying for a ruling from the ATO for share-for-share capital gains tax rollover relief. This transaction is intended to be tax-free for Afterpay shareholders in Australia. The receipt of confirmation of this ATO ruling is a condition for the transaction.
Square has agreed to establish a secondary listing on the ASX to allow Afterpay shareholders to trade Square shares through a CHESS depositary interest (CDI). So, whilst Afterpay will disappear from the ASX, Square will continue on the ASX.
Both businesses are expected to be improved by combining the two ecosystems.
Square said it will bring value, differentiation and scale to Afterpay. It will expand Afterpay’s reach with Square’s large and growing customer base of more than 70 million annual transacting active cash app customers and millions of sellers.
