Tyro Payments has rejected an opportunistic A$1.27 a share bid for the company from a private equity consortium, arguing that the proposal “significantly undervalues” the company.
And what APRA would have to say about a private equity buyout of a bank is anybody’s guess.
Tyro announced yesterday that it had received an unsolicited, non-binding and indicative proposal from a consortium of private equity investors led by Potentia Capital Management to acquire 100 per cent of its issued share capital.
The consortium also includes HarbourVest Partners, MLC Investments and the Construction and Building Unions Superannuation Fund (CBUS).
The indicative proposal values Tyro at $1.27 a share, with shareholders having the option of accepting cash, scrip in a privatised Tyro or a combination.
Potentia advised Tyro that it had entered into a voting and acceptance deed with Cannon-Brookes Head Trust (Grok) in relation to its 12.5 per cent shareholding in Tyro. Grok will support the bid, subject to conditions.
The Potentia bid is opportunistic, given the steep decline in the Tyro share price this year. Throughout 2020 and 2021, Tyro shares traded in a range between $3 and $4 a share but this year have fallen to a low of 60 cents in June before recovering to around $1 over the past month.
Like all fintechs, Tyro is under pressure from investors to produce earnings. It made a loss for the year to June and was cash flow negative. It has not made a profit in the past five years.
Tyro said in a statement yesterday that it has “attractive growth prospects as it continues to take share in the Australian payments and business banking markets” and it “expects to achieve strong and improving operating leverage in the medium term”.
That may not be enough to keep shareholders on side if Potentia comes back with a firm, improved offer.
Potentia is led by Andrew Gray, who has previously worked with Archer Capital and US technology buyout form Francisco Partners, and Tim Reed, who was chief executive of MYOB.
Some of its investments include MYOB, education software company Education Horizons, mine planning software company Micromine, payroll software company Ascender, and a payment terminal software and gateway services company Linkly.
Potentia said in its proposal that it has the relevant experience with tech companies to drive a successful business transformation at Tyro.
Tyro stock closed at $1.26 yesterday.