SYDNEY—
Square Inc.
SQ -3.14%
has agreed to an all-stock deal worth around $29 billion to acquire Australia’s
Afterpay Ltd.
APT -5.28%
, an installment-payment company that positions its service as a cheaper and more responsible alternative to a credit card.
Square said it plans to integrate Afterpay into its Seller and Cash App business units, which would allow more retailers to offer so-called buy now, pay later services at checkout.
Afterpay’s technology allows users to pay for goods in four, interest-free installments, while receiving the goods immediately. Customers only pay a fee if they miss an automated payment, a transgression that also locks their account until the balance is repaid. Afterpay says this limits bad debts, particularly in a downturn when job security is shaky and household finances are stretched.
Most of Afterpay’s revenue comes from retail merchants, which pay a percentage of the value of each order placed by customers, plus a fixed fee. The company is expanding across the U.S. through deals with retailers including Anthropologie and Free People.
“Square and Afterpay have a shared purpose,” said
Jack Dorsey,
Square’s chief executive. “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.”
Afterpay, Australia’s largest tech company by market capitalization, said the deal implies a value of around 126.21 Australian dollars (about US$92.66) for each of its shares, representing a 31% premium to its closing price on Friday.
Afterpay said its shareholders will receive 0.375 share of Square Class A common stock for each Afterpay share that they own. It expects Afterpay shareholders will own around 18.5% of the combined company when the deal completes.
Write to David Winning at david.winning@wsj.com
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