Afterpay Ltd (ASX:APT) today announces that it will increase its ownership of Afterpay US.

Afterpay has entered into an agreement with Matrix Partners X, L.P and Weston & Co X LLC, and is launching a tender offer to eligible participants under the Afterpay US, Inc. 2018 Equity Incentive Plan (US ESOP) to increase its underlying interest in Afterpay US, Inc. from 80% today to up to approximately 93%.

Afterpay also announces that it will today launch an offering of A$1.25 billion unsecured zero coupon convertible notes due 2026, with an option to upsize the offering by up to A$250 million. The Notes are convertible into fully paid ordinary shares in Afterpay.

Under the agreement with Matrix, Matrix will waive 35% of the underlying interest it holds in Afterpay US, Inc. under the Matrix Convertible Notes for approximately A$373 million in cash. The final price will be determined by reference to the reference share price of the Convertible Notes Offering. The transaction implies an acquisition price that values Afterpay US, Inc. (on a 100% basis) at 28% of Afterpay’s total market capitalisation. The acquisition price is accretive to Afterpay shareholders across GMV, revenue and customer multiples.

Concurrently, eligible US ESOP participants will be offered an ability to exchange their vested and unvested shares in Afterpay US, Inc. at the same implied valuation via the Tender Offer.

The move aligns with Afterpay’s objective to simplify its corporate structure while ensuring that Matrix and US ESOP holders remain aligned with the ongoing interests and success of Afterpay as a whole.

Afterpay intends to use the proceeds of the Convertible Notes Offering to (i) fund the Matrix Transaction, (ii) fund the cash component of the Tender Offer, and (iii) provide additional capital to continue to accelerate underlying sales growth.

Following completion of the Matrix Transaction, the number of Afterpay shares that may be issued upon conversion of the Matrix Convertible Notes will be calculated based on 6.5% of the future value of Afterpay US, Inc. in excess of US$50 million. This will result in a corresponding 35% decrease in the maximum number of Afterpay shares that may be issued to Matrix in the future under the Matrix Convertible Notes.