Afterpay (ASX:APT) shareholders vote in favour of Square takeover

Afterpay shareholders have had their say…

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It is a big day for the Afterpay Ltd (ASX: APT) share price.

This morning the buy now pay later provider's shareholders were given the opportunity to vote on the takeover proposal by Square.

Background

In August, the two parties agreed an all-scrip deal that would see Afterpay shareholders receive a fixed exchange ratio of 0.375 shares of Square Class A common stock for each Afterpay share they hold.

At the time, the Square share price was trading at US$247.26, which implied a transaction price of approximately $126.21 per Afterpay share. It also valued the deal at approximately US$29 billion or A$39 billion.

While this worked out to be an attractive 30.6% premium to the Afterpay share price at the time of $96.66, the Square share price has tumbled materially since then and was fetching $175.39 at Monday's close.

Based on this and current exchange rates, this means the takeover offer now equates to just $92.67, which is a 4.1% discount to the Afterpay share price prior to the receipt of the offer.

Ahead of the vote, the company released its rationale for recommending the offer.

It commented: "The Board considers that while the future growth prospects of a standalone Afterpay are strong, we believe that the combination of Afterpay with Block will deliver an unprecedented opportunity for both companies. For Afterpay, the combination is expected to further accelerate growth in the US and globally, offer access to a new category of in-person merchants, and provide a broader platform of new and valuable services to its merchants and customers. It also provides an exceptional opportunity for our team members to become part of a high-growth global company."

Shareholders vote

Despite losing significant value since being tabled, shareholders voted overwhelmingly in favour of the proposal at this morning's extraordinary general meeting.

While the full results of the vote have not yet been revealed, that won't matter. The proxy vote revealed that at least 86.35% of total shareholder votes were in favour of the scheme. This is more than the 75% threshold that was required to pass the scheme.

As a result, Afterpay looks almost certain to become part of Square early next year. It is only approval from the Bank of Spain that the companies are now waiting on.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended AFTERPAY T FPO and Block, Inc. The Motley Fool Australia owns and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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