Square Inc. today entered an agreement to buy Australian “buy now, pay later” firm Afterpay Ltd. in a deal worth $29 billion.

The two companies have entered into a Scheme Implementation Deed under which Square will make the purchase through shares. Under the deal, by court-approved Scheme of Arrangement, Afterpay shareholders will receive 0.375 shares of Square class A stock for every share they own with Afterpay shareholders to own about 18.5% of the combined company. Square will also pursue a secondary listing on the Australian Stock Exchange to allow Afterpay investors to trade their Square shares.

Afterpay’s board has unanimously recommended the deal and the company’s co-founders, Anthony Eisen and Nick Molnar, will join Square and one will join the company’s board.

Founded in 2010, Afterpay pitches itself as offering consumers an easy, reliable and safe payment method. While buy now, pay later services were not new in Australia when Afterpay first launched, the sector was dominated by old-school financial services providers such as GE Finance. By contrast, Afterpay offered a far easier product to access for both consumers and merchants alike. With an appealing product, Afterpay came to dominate the Australian BNPL market with an estimated 66% local share.

The company subsequently expanded into the U.K., Canada and the U.S., where it also found success. In the U.S. it competes with Affirm Holdings Inc., Zip Co Ltd.’s Quadpay and PayPal Holdings Inc. Afterpay was considering listing in the U.S as recently as April as its business took off in the country.

Coming into the acquisition, Afterpay has more than 16 million consumers and nearly 100,000 merchants globally, including many retailers in verticals including fashion, homeware, beauty and sporting goods.

Afterpay’s business will be integrated into Square’s Cash App and Seller ecosystems, enabling small merchants to provide customers access to BNPL at the checkout. Afterpay consumers will also have the ability to manage their installment payments directly in Cash App.

“The addition of Afterpay to Cash App will strengthen our growing networks of consumers around the world while supporting consumers with flexible, responsible payment options,” Brian Grassadonia, lead of Square’s Cash App business, said in a statement. “Afterpay will help deepen and reinforce the connections between our Cash App and Seller ecosystems, and accelerate our ability to offer a rich suite of commerce capabilities to Cash App customers.”

Square did warn, however, that the acquisition of Afterpay — which has never been profitable — would affect its bottom line. The company said that although Afterpay will drive long-term growth with “meaningful revenue synergy opportunities,” the acquisition will result in a modest decrease in adjusted earnings before interest, taxes, depreciation and amortization in the first year after competition of the transaction.

The announcement of the Afterpay acquisition came on the same day Square also announced its second-quarter earnings.

For the quarter, Square reported a gross payment volume of $42.8 billion, up from $33.1 billion in the first quarter and $22.8 billion in the same quarter of 2020. Revenue from bitcoin slipped from the previous quarter as the price of bitcoin stabilized.

Revenue in the quarter came in at $4.68 billion, below the $5.05 billion expected by analysts, while earnings per share came in at 66 cents versus a predicted 31 cents per share.

Image: Afterpay