Afterpay share price hits $82 on European expansion news

We look at the details behind Afterpay’s just-announced European expansion plans.

Buy now pay later (BNPL) juggernaut Afterpay (APT) hit a fresh all-time high on Monday after revealing its plans to expand into Europe.

Centrally, the growth-focused Afterpay today said that it would be entering the European market by acquiring the European BNPL and credit company Pagantis SAU and PMT Technology SLU (Pagantis).

This acquisition would be undertaken through a share purchase plan (SPP) with NBQ Corporate SLU (NBQ), under which 100% of Pagantis’ outstanding shares would be acquired.

Speaking of this plan, Afterpay’s MD and CEO, Anthony Eisen said:

'Acquiring Pagantis provides us with the necessary regulatory licencing, resourcing and infrastructure to expedite the launch of Afterpay into key countries in Southern Europe and beyond.'

The company – excited over the strategic significance of Europe – quantifies the continent’s addressable e-commerce market at over $496 billion.

Afterpay share price rises as FY20 earnings loom

Off the back of the above noted news, investors bid the stock up, with APT closing out the session up 4.79%, at $82.73 per share. As Afterpay’s full-year results quickly approach – due out this Thursday – investors have clamoured to get their hands on the stock: with APT up 10.75% in the last five sessions and 17.73% in the last month.

The company now has a market capitalisation of $23.17 billion.

Details of the European roll-out

Following the completion of the acquisition, Pagantis' current technology will be re-configured with Afterpay’s core product functionality, while the company will carry Afterpay’s ‘minty’ Clearpay branding.

In step with that, it was noted that the company's ‘existing consumer fee instalment and credit card offerings will be discontinued post completition'; while its existing loan book will be retained by NBQ.

Underscoring those decisions, as part of the acquisition, NBQ will receive an upfront consideration of ‎€5 million in cash, with a deferred consideration of ‎€45 million in cash, payable three years post completition of the acquisition, from Afterpay.

Importantly, it was noted that the deferred consideration may exceed that amount 'provided the equity value of Pagantis exceeds ‎€45m, 3 years post completition.'

For reference, Pagantis, in its current form, has operations spanning Spain, France, Portugal and Italy – regions which Afterpay cites as having a total combined addressable market of $247 billion. The company currently has 1,400 active merchants and 150 thousand active customers.

Afterpay noted that it would invite the customers and merchants which are deemed 'relevant' to transition to the Clearpay platform once its implementation has been finalised following the completition of the acquisition.

'Spain, France and Italy all have internet penetration in excess of 90%, approximately 30m millennial inhabitants and debit card usage that is higher than credit card usage,' the company positively noted.

Afterpay expects the acquisition to be complete by December, subject to regulatory approval and is currently targeting a third quarter fiscal 2021 European launch date.

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