Block’s acquisition of Afterpay has been given the all-clear by the Bank of Spain, closing the book on Australia’s largest ever merger deal

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• The Bank of Spain has given the all-clear to a Block’s $39 billion merger deal with Afterpay.
• Afterpay will now cease trading on the ASX from January 19, and secondary Block shares will begin trading the day after.
• But shareholder returns on the deal aren’t expected to promise as much as they once did, as investor interest in the BNPL space cools.
• Visit Business Insider Australia’s homepage for more stories.

Block, formerly Square, has been given the green light on its $39 billion acquisition of Afterpay, bringing to an end the final stages of the largest-ever merger deal in Australian history.

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Afterpay told investors on Monday that Jack Dorsey’s Block had sealed regulatory approval of the deal from the Bank of Spain, which was required after Afterpay’s Clearpay, based in Britain, bought Spanish BNPL outfit Pagantis in August last year for about $79 million.

Afterpay chair Elana Rubin said that now that the Spanish central bank’s approval had been secured, the deal is fully unconditional and will be implemented without any further shareholder or court approval. 

“Afterpay, its leadership and the team have shown that groundbreaking fintech innovation built in Australia can reach global proportions,” Rubin said. 

“The team are incredibly excited at the prospect of beginning an extraordinary next phase with Block, Inc. and look forward to implementation on 1 February 2022,” she said. 

“On behalf of the Board and management, thank you to our shareholders, customers, merchants, broader stakeholders and regulators, for recognising the potential of this incredible company and for sharing in the vision of fairness and financial freedom for all.”

Per the deal, Afterpay shares will suspend trading on the Australian Stock Exchange (ASX) from January 19, before Block will start trading on the local bourse under the ticker “SQ2” the day after. 

Square, which was founded by Twitter CEO Jack Dorsey, reached an agreement to purchase Australian buy now, pay later (BNPL) pioneer Afterpay for $US39 billion in August. 

In a joint statement, the pair said the all-stock deal would bring Afterpay into Square’s larger stable of peer-to-peer and merchant transaction capabilities. 

The US-based Square said Afterpay’s BNPL functionality will be added to the Square Seller and Cash App ecosystems, allowing small merchants access to the increasingly popular method of payment and allowing Afterpay users to manage their payments on the existing Cash App platform.

When the deal was announced, Afterpay co-founders and co-CFOs Anthony Eisen and Nick Molnar said the deal aligns with the company’s international ambitions.

“By combining with Square, we will further accelerate our growth in the US 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,” they said.

The pair delivered familiar remarks again on Tuesday, saying both companies shared a vision of “financial empowerment”. 

“I’m incredibly humbled that with your support we’ll soon be joining forces to further scale and shape our businesses with a shared purpose,” Molnar told Afterpay shareholders.

“Today we’re at the start of an amazing partnership and I know our team across the globe share the excitement and enthusiasm at the opportunity to come.”

Both Molnar and Eisen will join Block under the deal to work on the company’s merchant and consumer businesses, while one of the two will be appointed to the Square board.

Block will offer a secondary listing on the ASX, allowing Australian-based investors to choose between shares listed on the NYSE or the domestic bourse.

Afterpay shareholders are expected to own 18.5% of the company once the deal is enacted, with an expected completion in the first quarter of the 2022 calendar year.

But shareholder returns on the deal aren’t expected to promise as much as they once did, as investor interest in the BNPL space cools on the heels of a massive shake-up of Australian payment regulation, and the launch of a regulatory probe into the sector in the US. 

Afterpay shares have slipped to 12-month lows in recent weeks as a result, closing at $73.51 a piece on Tuesday, just above the firm’s 52-week low of $71.61.

According to Morgans equities analyst Richard Coles, the sector’s dominant players — particularly Afterpay and Zip — would need to deliver strong results in the first half of the year to reverse the sentiment. 

“The sector is suddenly unloved by investors, so solid 1H22 results are required to change sentiment,” Coles said. “We expect strong revenue growth for Afterpay and Zip, but we still expect both stocks to report (first-half) losses.”

Existing Afterpay investors will be granted 0.375 shares of Square Class A common stock for every unit of Afterpay they hold. Afterpay shares closed at $94.69 a piece on Monday.

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