Westpac’s announcement that it is in takeover talks with Tyro Payments follows news earlier this year ANZ formed a joint venture with French payments company Worldline.
Now that the big banks are at the end of the long process of selling off their financial planning, superannuation, asset management and insurance businesses, and most of their offshore banking investments, they are looking to invest in bolstering core activities. Payments appears to be high on the list.
Westpac confirmed yesterday that it has had “preliminary discussions” with Tyro. The bank said an acquisition would strengthen its small business proposition, enabling it to grow its merchant acquiring business.
Westpac is not the only potential suitor for Tyro. The Australian reported that NAB is also looking at launching a bid and in September Tyro rejected an offer from a private equity consortium led by Potentia Capital Management.
Potentia’s indicative offer was $1.27 a share, valuing Tyro company at around A$658 million. Tyro said the proposal “significantly undervalued” the business and was opportunistic.
Tyro’s share price has climbed since then, driven by all the takeover talk. The stock closed at $1.59 yesterday. It was at a multi-year low of 60 cents at the end of June.
Tyro is Australia’s fifth largest merchant acquirer by terminal numbers. It has a payments partnership with Bendigo Bank, providing payments services to the bank’s customers.
Last year, it acquired a “cardless digital healthcare claiming and payment platform” Medipass Solutions. It has integrated Medipass into its existing health business and also integrated third party healthcare software so that it is able to support 13,000 healthcare providers.
It also has a banking division, providing working capital finance to its business customers. The division originated $99.1 million of loans in 2021/22 and contributed $5.5 million to total revenue of $326.1 million.
This part of the business would appeal to Westpac, which is keen to increase its share of business lending, which produces a higher margin than home lending.
Westpac, or any new owner, would have to knock Tyro into shape. It lost $29.6 million in 2021/22, following a loss of $29.8 million in 2020/21. It has not made a profit in the past five years.
Net cash outflow from operating activities, excluding loans and deposits, was $9 million in 2021/22, compared with outflow of $10.9 million in 2020/21.
The transaction value processed by Tyro rose 34 per cent to $34.2 billion and merchant numbers grew 10 per cent to 63,770. The Bendigo Alliance accounted for $5.2 billion of transactions.
ANZ’s joint venture, ANZ Worldline Payment Solutions, is 51 per cent owned by Worldline and 49 per cent by ANZ. ANZ’s merchant acquiring business has been sold into the JV.
Worldline claims to be the biggest player in the European payments services market and number four worldwide, operating in 50 countries and working with 1200 banks and financial institutions.
ANZ said the JV would give its business customers access to “best in class” payment technology.