Block’s Afterpay bid wins final approval from Spanish central bank

US group Block has received the final regulatory approval for its $39 billion takeover of buy now, pay later group Afterpay, capping off the biggest deal in Australian corporate history.

Afterpay told the ASX on Tuesday that it had received final approval from the Bank of Spain, which was the final hurdle the deal need to clear before being completed.

Afterpay has been a darling of the Australian stock exchange.Credit: Attila Csaszar

Afterpay shareholders have already resoundingly approved the deal with more than 99 per cent of shares voted in favour of the proposal. On Tuesday they cheered the final approval for the deal, sending Afterpay’s shares 4.75 per cent higher to close at $77.

Block, led by Twitter founder Jack Dorsey, plans to integrate Afterpay’s buy now, pay later products with its suite of payment technology products, including its successful white payment terminals that are part of its “Seller” business.

With the approval from Spain’s central bank now in hand, the deal is expected to be formally completed on February 1.

Ahead of that date, Afterpay’s shares will be suspended from trading on January 19. Block’s secondary shares, known as CHESS depository interests, will begin trading on the ASX from January 20. Under the deal, Afterpay shareholders will receive for each of their shares a 0.375 share of Square’s class A common stock.

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

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

Macquarie analysts said there was an opportunity for shareholders to take advantage of the current gap between Block’s and Afterpay’s share price given the regulatory approval by the Spanish central bank kept a lid on Afterpay’s share price.

“Since the announcement of the proposed acquisition, Afterpay shares have been trading largely in line with Block,” Macquarie’s team of technology analysts led by Wei Sim said in a note to clients.

“Since the beginning of 2022, however, the discount gap has widened, in our view reflecting potential risk that the deal would not go ahead due to delays from Bank of Spain approval.

“This has created a short-term opportunity for Afterpay shareholders as the gap between the two should now close as all regulatory approvals have now been received.”

The deal caps off an incredible run by the Nick Molnar and Anthony Eisen founded group since it listed on the ASX in 2016 following an initial public offering where it raised $25 million at $1 a share.

But Afterpay’s current share price is a long way off the implied $126.21 valuation of its shares when the deal was announced by Block, then known as Square, in early August. Square’s shares have also fallen in value since the tie-up was revealed, dropping from $US247.26 in early August to $US148.43 in Monday’s trading session in the US.

The fall in Afterpay and Square’s share price has also altered the valuation of the all-scrip deal which now sits at about $24 billion.

Afterpay and other buy now, pay later groups have copped a battering in recent months as investors grow concerned about regulatory intervention in Australia and in the US. Technology groups, especially those with modest profits compared to their sky-high valuations, have also taken a hit in the past month amid growing concerns the US Federal Reserve will raise interest rates.