Square to buy Australian 'buy now pay later' company Afterpay for $41 billion

Square co-founder and chief executive Jack Dorsey. Photo / Getty Images

Two neighbours who created a tech start-up in their Sydney home seven years ago have just landed a US$29 billion deal ($41.5b) with a US company overnight.

Ex-neighbours and now co-CEOs Nick Molnar and Anthony Eisen started buy now, pay later company Afterpay in 2014, based on the idea that Millennials prefer cashless and credit-free lifestyles.

They listed the service on the stock market in 2016 and since then, Afterpay has gone from strength to strength with more than 16 million customers around the world and rising to the ASX top 20.

On Monday, the co-founders announced an acquisition with US digital payments company Square to the tune of US$29b – and they will also join Square once the deal is completed in the first quarter of 2022.

That staggering number is 42 times Afterpay's revenue, and makes it the biggest merger announced in Australia's history.

Molnar's holds a stake of 6.87 per cent while Eisen's has 6.72 per cent in stocks.

That means they each stand to make around A$2.7b ($2.8b). This will all be paid out in stocks.

Square is similar to Afterpay in that it aggregates merchant services and mobile payments into a single, easy-to-use service.

It was founded by Jack Dorsey – who also created social media platform Twitter.

Dorsey said of the acquisition: "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."

Eisen and Molnar were also excited by the deal.

"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," Eisen and Molnar said in a joint statement.

"We are fully aligned with Square's purpose and, together, we hope to continue redefining financial wellness and responsible spending for our customers."

Eisen added, "The transaction marks an important recognition of the Australian technology sector as homegrown innovation continues to be shared more broadly throughout the world.

"It also provides our shareholders with the opportunity to be a part of future growth of an innovative company aligned with our vision."

Square plans to integrate Afterpay into its existing business. It already has plans to incorporate Afterpay into its Cash App.

Afterpay assured shareholders that they did not need to take any action at this stage.

It will apply for a ruling from the Australian Taxation Office to confirm that the transaction will be tax free for its shareholders.