Australian Startup Payments Companies Merge

Afterpay Holdings Limited and Touchcorp Limited have signed a heads of agreement relating to an in principle agreement for a proposed merger under a newly incorporated Australian holding company Newco, proposed to be implemented by inter-conditional schemes of arrangement (Proposed Merger).

The Proposed Merger is expected to deliver significant benefits to shareholders of both companies and enhance the attractiveness of our combined customer proposition. The key terms of the Proposed Merger include:

A newly incorporated Australian company (NewCo) will issue new shares to Afterpay shareholders (excluding Touchcorp, which currently holds approximately 26% of Afterpay shares on issue on a fully diluted basis) on a 1:1 basis and to Touchcorp shareholders on a 0.64:1 basis such that at completion of the Proposed Merger, NewCo will be owned approximately 64% by Afterpay shareholders (excluding Touchcorp) and approximately 36% by Touchcorp shareholders, each on a fully diluted basis

NewCo will acquire Touchcorp and Afterpay by two separate interconditional schemes of arrangement, following which Touchcorp and Afterpay would each become wholly-owned subsidiaries of NewCo  NewCo would be listed on the Australian Securities Exchange (ASX)

Anthony Eisen will be NewCo’s Executive Chairman and Nick Molnar will be the Managing Director and Chief Executive Officer, Nadine Lennie will be the Chief Financial Officer and Jason Van will be the Chief Technology Officer. Conditions and Timing The parties have entered into a 4 week period of exclusivity (subject to customary fiduciary outs) during which time they intend to conduct due diligence and negotiate and finalise a definitive Merger Implementation Agreement for the Proposed Merger.

The Proposed Merger, if formalised, would be subject to a number of conditions, including each party obtaining all necessary regulatory and shareholder approvals. The key conditions to the Proposed Merger are set out in the Annexure.

The boards of both Afterpay and Touchcorp support the merger in the absence of a superior proposal and believe the complementary skill sets will deliver stronger shareholder value than could be attained for shareholders of either company by acting independently from each other. In particular, the merged group is expected to benefit from:

The technology solution that underpins the Afterpay product will be developed and managed within NewCo to enable a direct focus on building on the success of Afterpay to date

A broader product mix and greater financial and operational scale than either entity can expect to possess alone

Revenue growth opportunities from the combination of Afterpay’s extensive retail network and Touchcorp’s strong technology offering  a single sales channel to the retail market for products and services that Touchcorp has developed to enhance the consumer’s purchase experience

Benefits of scale with input cost synergies and process efficiencies

“I am excited by the prospect of what these two companies can achieve together as a potentially merged group.” Afterpay Managing Director, Nick Molnar said, “We are pleased to have an opportunity to work even closer together.

Afterpay’s success over the past 12 months has been driven by building very strong retail relationships and engaging customers on a personal level. Underpinning this strong growth has been the hard work of the Touchcorp team and we are pleased to work even closer together.”

Touchcorp Executive Chairman, Mr Mike Jefferies said, “We are delighted to announce the intention to pursue the proposed merger. This transaction will provide Touchcorp shareholders with a compelling offer. The proposed merger would represent a unique opportunity to combine the outstanding technology set from Touchcorp with the strong sales focus and brand recognition of Afterpay to develop stronger propositions to customers and investors.” The parties will make a further announcement on the progress of the Proposed Merger in due course.

 

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