IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

Afterpay Scheme Meeting on 6 Dec, IE Opinion

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Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/afterpay-limited" target="_blank" data-smartkarma-citation="entities:26940:1" rel="noopener">Afterpay Touch (APT AU)</a> is a leading buy now, pay later (BNPL) player. Afterpay revealed that <a href="https://www.smartkarma.com/entities/square-inc" target="_blank" data-smartkarma-citation="entities:23755:1" rel="noopener">Square Inc (SQ US)</a> had agreed to acquire it through a recommended scheme of arrangement. Square will offer a fixed exchange ratio of 0.375 Square shares per Afterpay share. Based on Square's closing price on 30 July, the implied transaction price of A$126.21 per share is a 30.6% premium to the share price of A$96.66 per share on the last trading date (30 July). The deal has an implied value of A$39 billion and if completed, would be the largest in Australian M&amp;A history. </p><p>The completion conditions include Afterpay and Square shareholder approval along with regulatory approval. Square intends to also establish a secondary listing on ASX. Afterpay shareholders will own 18.5% of the combined company on a fully diluted basis.</p><div class="content-highlight"><p>While the share price has traded recently above the implied offer price, we think that offer is attractive in comparison to historical EV/Sales multiples and average share prices. With BNPL competition steadily increasing, the all-scrip deal gives shareholders the opportunity to benefit from the ability of the combined Square + Afterpay to expand the customer base and strengthen the product portfolio. At Square's current price of US$274.93 at the time of writing (+11% on Friday close), Afterpay shares are trading at a 22% gross spread to the indicative offer.</p></div>

Afterpay Touch (APT AU) is a leading buy now, pay later (BNPL) player. Afterpay revealed that Square Inc (SQ US) had agreed to acquire it through a recommended scheme of arrangement. Square will offer a fixed exchange ratio of 0.375 Square shares per Afterpay share. Based on Square's closing price on 30 July, the implied transaction price of A$126.21 per share is a 30.6% premium to the share price of A$96.66 per share on the last trading date (30 July). The deal has an implied value of A$39 billion and if completed, would be the largest in Australian M&amp;A history. The completion conditions include Afterpay and Square shareholder approval along with regulatory approval. Square intends to also establish a secondary listing on ASX. Afterpay shareholders will own 18.5% of the combined company on a fully diluted basis.While the share price has traded recently above the implied offer price, we think that offer is attractive in comparison to historical EV/Sales multiples and average share prices. With BNPL competition steadily increasing, the all-scrip deal gives shareholders the opportunity to benefit from the ability of the combined Square + Afterpay to expand the customer base and strengthen the product portfolio. At Square's current price of US$274.93 at the time of writing (+11% on Friday close), Afterpay shares are trading at a 22% gross spread to the indicative offer.

Square Lobs a Market-Defining Bid for Afterpay