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ThinkSmart strong buy opportunity: Squaring the circle

The Aim-traded finance company’s valuable 10 per cent stake in Clearpay is ripe for a buy out from majority owner Afterpay after the A$36bn Australian fintech group itself received a takeover from US fintech group Square.
ThinkSmart strong buy opportunity: Squaring the circle
  • Square Inc launches US$29bn takeover of Afterpay Touch
  • Afterpay owns 90 per cent of Clearpay and ThinkSmart owns 10 per cent stake
  • Call arrangement on 10 per cent Clearpay stake can be exercised early in the event of change of control of Afterpay.
  • ThinkSmart’s shares trading 38 per cent below sum-of-the-parts valuation.

Afterpay Touch (APT:ASX – A$114.80), a A$36bn (£20bn) market capitalisation Australian Stock Exchange-listed technology group, has recommended a US$29bn (A$39bn) all share takeover for the company from New York Stock Exchange listed Square Inc (NYSE:SQ.), a US$113bn fintech group. The offer of 0.375 new Square share for every one Afterpay share values the Australian stock at A$126.21, a 30 per cent premium to Friday’s closing price. Afterpay’s share price rallied 18 per cent during Australian trading hours, but trades 10 per cent below the implied offer price. Subject to shareholder approval, the transaction is expected to complete in the first quarter of the 2022 calendar year.

Combining the two group’s makes strategic sense. Square’s chief executive and co-founder Jack Dorsey points out that “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,” adding that “together, we can better connect our cash app and seller ecosystems to deliver even more compelling products and services for merchants and consumers, putting the power back in their hands.”

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