Tyro Payments rejects ‘highly opportunistic’ $693m takeover offer

Tyro Payments has knocked back a $693 million takeover offer, labelling the pitch lobbed by private equity investors along with investment giants MLC and Cbus ‘highly opportunistic’.

Tyro, which is the largest provider of eftpos services outside the big four banks, on Thursday said it had received a non-binding an indicative proposal to buy the business at $1.27 a share from a consortium led by private equity firm Potentia Capital.

The consortium, which also includes private equity firm HarbourVest Partners, MLC and construction industry superannuation fund Cbus, has the conditional support of Tyro’s biggest shareholder, Mike Cannon-Brookes’ investment company Grok Ventures, which owns 12.5 per cent of Tyro.

In early trading, Tyro shares had surged 25 per cent to $1.23. The offer price is a 29 per cent premium to Tyro’s closing share price on Wednesday, and the bidders said it was 50 per cent higher than the average trading price of the stock over the last 60 days. Potentia said its bid represented a $693 million enterprise value for Tyro, a figure that includes company debt.

Tyro, which floated in 2019, has seen its shares slump 66 per cent this year, amid a wider plunge in the valuations of fintech businesses. The company, led by Robbie Cook, is a payment specialist founded in 2003, which competes with the major banks for merchant customers including retailers, health businesses and hospitality companies.

Tyro’s board, led by former Telstra boss David Thodey, said in a statement the price was “materially below Tyro’s fundamental value and highly opportunistic” saying the fintech was taking share from the banks in payments and business banking, and it had strong growth prospects.

“The Board has considered the Indicative Proposal including with the assistance of its financial and legal advisers and unanimously determined the Indicative Proposal significantly undervalues Tyro and, as such, is not in the best interest of shareholders as a whole. The Board has therefore determined to reject the proposal in its current form,” Tyro’s board said.

Potentia, a software and technology-focused venture capital firm, said Cannon Brookes’ Grok Ventures had entered into a deed that meant Grok would support Potentia’s bid at the current price, subject to some conditions. Under this deed, Grok would not take any action under a competing proposal unless it was more than 25c a share higher than the Potentia bid.

“We believe Tyro requires a level of business transformation that can be best undertaken under private ownership,” Potentia said.

“Potentia Capital is uniquely placed to assist Tyro deliver this transformation given our strong experience in B2B software and payments, track record of helping Australian software businesses scale, and the significant capital and resources Potentia can bring to support organic and inorganic growth.”

More to come