Payments giant Square acquires lending pioneer Afterpay in $29bn deal

BY Fraser Tennant

Bringing together two of the fastest growing global FinTech companies, US payments company Square is to acquire Australian ‘buy now, pay later’ lending provider Afterpay in a $29bn all-stock transaction.

Under the terms of the agreement, which has been approved by the boards of directors of both companies, Afterpay shareholders will receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay ordinary share.

Afterpay’s global merchant base will accelerate Square’s growth with larger sellers and expansion into new geographies, while helping to drive further acquisition of new Square sellers.

“Afterpay has built a trusted brand,” said Jack Dorsey, co-founder and chief executive of Square. “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.”

An industry leader with a best-in-class product and strong cultural alignment with Square, Afterpay serves more than 16 million consumers and nearly 100,000 merchants globally, including major retailers across key verticals such as fashion, homewares, beauty, and sporting goods.

“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 services to our merchants and consumers,” said Anthony Eisen, co-founder and co-chief executive of Afterpay. “We are fully aligned with Square’s purpose and, together, we hope to continue redefining financial wellness and responsible spending for our customers.”

Afterpay's co-founders and co-chief executives will join Square upon completion of the transaction and help lead Afterpay’s respective merchant and consumer businesses, as part of Square’s Seller and Cash App ecosystems.

“The transaction marks an important recognition of the Australian technology sector as homegrown innovation continues to be shared more broadly throughout the world,” added Nick Molnar, co-founder and co-chief executive of Afterpay. “It also provides our shareholders with the opportunity to be a part of future growth of an innovative company aligned with our vision.”

The transaction is expected to close in the first quarter of 2022, subject to the satisfaction of certain closing conditions.

Mr Dorsey concluded: “Square and Afterpay have a shared purpose: building our business to make the financial system more fair, accessible and inclusive.

News: Twitter's Dorsey leads $29 bln buyout of lending pioneer Afterpay

Few FS firms ready for open banking deadline, reveals new report

BY Fraser Tennant

Despite being viewed as a key priority, few financial services (FS) firms are prepared for major open banking enforcement deadlines in September 2021, according to new research report by Delphix.

The report – ‘The Future of Banking is Open and Regulated, but Few are Prepared’ – reveals that only 3 percent of firms believe they are ready for the Second Payments Services Directive (PSD2) and Strong Customer Authentication (SCA), both of which were initially slated to take effect in September 2019, but then delayed by two years.

The report surveyed 100 tech leaders in the finance banking and insurance industry – all of whom are from Europe, the Middle East and Africa (EMEA) and Asia-Pacific (APAC) jurisdictions and work at companies with over 10,000 employees.

“The financial services sector is undergoing a massive transformation with data at the core,” said Daniel Graves, chief technology officer at Delphix. “For many banks that rely on legacy systems, however, data privacy and compliance are proving to be major obstacles.”

Drilling down, 62 percent of poll respondents cite protecting sensitive data across multiple systems and application programming interfaces (APIs) as the biggest data privacy and compliance challenge. Others are struggling with effectively protecting sensitive information without limiting timely access to data and ensuring that compliance measures preserve the quality and usability of data.    

When it comes to opening up APIs to third parties in order to drive innovation, the biggest challenge for 60 percent of respondents is the time and effort needed to maintain and preserve the integrity of data. At the same time, 52 percent of FS firms report limited capability to accelerate the development of quality APIs and API-driven features to market.

Overcoming these hurdles will be challenging, states the report, with the majority of respondents predicting their organisational operations will be disrupted as they roll out open banking APIs.

“Data privacy challenges and legacy technology stacks are impeding the Open Banking revolution,” added Mr Graves. “FS firms need to adopt DevOps data technologies that can deliver compliant data at speed via APIs to overcome these challenges.”

Mr Graves concluded: “Open banking APIs could open up a whole new world for FS firms, enabling them to use data to drive transformational services and power superior customer experiences.”

Report: The Future of Banking is Open and Regulated, but Few are Prepared

Safety first for Magna

BY Richard Summerfield

Car parts giant Magna International has agreed to acquire Swedish rival Veoneer Inc. in an all-cash deal worth $3.8bn.

Under the terms of the deal, Magna will acquire all the issued and outstanding shares of Veoneer for $31.25 per share in cash, representing an equity value of $3.8bn, and an enterprise value of $3.3bn, inclusive of Veoneer’s cash, net of debt and other debt-like items as of 31 March 2021. The price represents a 57 percent premium to Veoneer’s closing price on Thursday, the day the deal was announced.

The acquisition will help Magna achieve about $100m in annual cost savings by 2024, according to a joint statement released by the two companies. The deal, which has been approved by the boards of both companies, is expected to close by the end of this year.

For Magna, the acquisition of Veoneer will provide a boost to the company’s efforts to build driver assistance technology geared toward autonomous vehicles. Veoneer manufactures advanced driver assistance systems, such as collision warning and parking assist systems.

Global automotive suppliers are increasingly positioning themselves to benefit from the growth in advanced safety features in passenger cars. Semi-autonomous features like hands-free driving and crash-avoidance technology are becoming ever more prevalent.

Veoneer was spun off by auto-safety supplier Autoliv Inc. in 2018.

“Veoneer’s complementary technology offerings, customer base, and geographic footprint make it an excellent fit with our ADAS business, and the acquisition strengthens our global engineering and software development talent base,” said Swamy Kotagiri, chief executive of Magna. “We expect the combined entity to be an industry leader in active safety solutions, to enhance its position in complete ADAS systems, and to be well-positioned for the transition towards higher levels of autonomy. The acquisition is also consistent with our go-forward strategy to accelerate investment in high-growth areas.”

“This is a compelling transaction for all stakeholders,” said Jan Carlson, chairman, president and chief executive of Veoneer. “It will deliver significant and immediate value to Veoneer stockholders through an attractive premium to our trading price, and provide new opportunities for our employees to join one of the most capable suppliers in the mobility space. In addition, combining forces with Magna will allow the combined business to elevate its status as a full-systems ADAS supplier, which should benefit our customers, supplier partners and ultimately consumers.”

News: Magna's $3.8 billion Veoneer buy to drive car safety business

Zoom to acquire Five9 in $14.7bn all-stock deal

BY Richard Summerfield

Zoom Video Communications Inc is to buy cloud-based call centre operator Five9 Inc in an all-stock deal worth $14.7bn. The transaction is expected to close in the first half of 2022.

Under the terms of the deal, Five9 stockholders will receive 0.5533 shares of Class A common stock of Zoom for each share of Five9. Based on the closing share price of Zoom Class A common stock on 16 July 2021, this represents a per share price for Five9 common stock of $200.28 and an implied transaction value of approximately $14.7bn.

Zoom has risen to prominence over the last 18 months thanks to the role it has played in keeping businesses and schools operating during the pandemic. But as economies begin to open up thanks to the COVID-19 vaccine roll out, the company has been under pressure to diversify its product offering.

“The acquisition is expected to help enhance Zoom’s presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24-billion contact center market,” Zoom said in a statement.

Five9 is a cloud-based call centre operator whose facilities are used by more than 2000 clients globally.

“We are continuously looking for ways to enhance our platform, and the addition of Five9 is a natural fit that will deliver even more happiness and value to our customers,” said Eric S. Yuan, chief executive and founder of Zoom. “Zoom is built on a core belief that robust and reliable communications technology enables interactions that build greater empathy and trust, and we believe that holds particularly true for customer engagement.

“Enterprises communicate with their customers primarily through the contact center, and we believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers,” he added. “We are thrilled to join forces with the Five9 team, and I look forward to welcoming them to the Zoom family.”

“Businesses spend significant resources annually on their contact centers, but still struggle to deliver a seamless experience for their customers,” said Rowan Trollope, chief executive of Five9. “It has always been Five9’s mission to make it easy for businesses to fix that problem and engage with their customers in a more meaningful and efficient way.

“Joining forces with Zoom will provide Five9’s business customers access to best-of-breed solutions, particularly Zoom Phone, that will enable them to realize more value and deliver real results for their business,” he continued. “This, combined with Zoom’s ‘ease-of use’ philosophy and broad communication portfolio, will truly enable customers to engage via their preferred channel of choice.”

News: Zoom to buy cloud-based call center operator Five9 in $15 bln deal

US Virgin Islands refinery Limetree Bay files for Chapter 11

BY Fraser Tennant

Following a series of operational setbacks which shuttered its St. Croix facility, US Virgins Islands refinery Limetree Bay Refining, LLC, as well as several of its affiliates, has filed for Chapter 11 bankruptcy.  

Through the Chapter 11 process, Limetree Bay intends to engage in discussions with its lenders, creditors, equity owners and others to evaluate options to maximise the value of the estate and recoveries for stakeholders, including exploring a potential sale of its assets.

Furthermore, the company has received commitments for up to $25m in new debtor-in-possession (DIP) financing that, upon court approval, is expected to provide sufficient liquidity to meet ongoing business obligations related to the maintenance of the refinery during the Chapter 11 process.

The Chapter 11 filing was necessitated in part by the temporary suspension of Limetree Bay’s petroleum refining and processing operations in May 2021 and the indefinite suspension of its plans to restart the refinery due to severe regulatory and financial constraints. The refinery had only restarted in February this year after being idle for nearly a decade.

It is expected that management will continue to be responsible for handling the care and maintenance of the refinery and all other necessary day-to-day operations throughout the Chapter 11 process. At the same time, Limetree Bay’s parent expects to continue operations at its oil storage terminal business.

“We are extremely grateful to our investors, employees and business partners for standing by us through the restart process and these uncertain times,” said Jeff Rinker, chief executive of Limetree Bay. “Severe financial and regulatory constraints have left us no choice but to pursue this path, after careful consideration of all alternatives.”

Capable of processing around 200,000 barrels per day, key restart work at Limetree Bay’s St. Croix site began in 2018, including the 62,000 barrels per day modern, delayed Coker unit, extensive desulfurisation capacity, and a reformer unit to produce clean, low-sulfur transportation fuels. The restart project provided much needed economic development in the US Virgin Islands and created more than 4000 construction jobs at its peak.

Mr Rinker concluded: “The Chapter 11 process provides Limetree Bay with the clearest path to maximise the value of our estate for our stakeholders while safely preparing the refinery for an extended shutdown.”

News: Investors balk as bankrupt St. Croix refinery needs $1 bln to be viable