It could be time to sell your Myob Group Ltd (ASX: MYO) shares.
Why? For one, its board of directors recommended the KKR takeover.
As a result of their decision and announcement, the MYOB share price has risen nearly 14% to $3.27 in early trade.
Why it could be time to sell your MYOB shares
After a period of negotiation, MYOB’s directors have decided to unanimously recommend that shareholders vote in favour of the takeover offer, which is priced at $3.40 per share.
MYOB has until 22 February 2019 to find a better offer from another suitor. If there is a better offer there is no ‘break fee’. If there is a better offer, KKR has committed to sell the shares that it already owns.
MYOB Chairman Justin Milne said: “The unique provisions of the agreement with KKR provide a level of certainty for our shareholders”.
As part of the announcement, MYOB confirmed its FY18 earnings guidance:
- Organic revenue growth of approximately 7%
- Research & Development expenditure of around 19% of revenue
- Underlying EBITDA margin of 42% to 43% (click here to learn what EBITDA means)
- Free cash flow above $100 million
Reasons Why It Might Be Time To Sell
Some of the reasons why MYOB said it was worth accepting the offer was:
- the attractiveness of the offer
- the current market volatility which has sent the share prices of many tech businesses down
- the disruptive impact of a failed takeover offer, and
- the significant short-term investing required to achieve the strategic growth plan.
It’s that last point that is perhaps the best reason to consider selling MYOB shares, aside from the limited upside from the current price to the takeover price.
Myob Is Up Against It…
Many accountants and business owners that have used both MYOB and Xero Limited (ASX: XRO) software would argue that Xero is much more user-friendly, visually appealing and has better-automated tools.
MYOB can either maintain its profitability but steadily lose market share, or invest heavily to compete but lose some profits.
On the investment side of things, Xero is creating attractive growth locally and internationally. In Australia and New Zealand, Xero grew its subscriber numbers by 24% and revenue by 30% in its half-year report. In the UK Xero grew subscribers by 40% and US subscribers increased by 45).
A Better Buy?
Compared to MYOB, Xero has long growth tailwinds and a large ecosystem of add-on services. With the takeover offer, something to consider could simply be to turn money from MYOB shares into Xero shares with the recent share market declines.
Over the long term, the best strategy could be to go for shares growing at a fast pace like Xero and the other shares in the free report below.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).