The Tyro Payments Ltd (ASX: TYR) share price has jumped 30% after receiving a takeover offer.
Tyro offers merchants payment terminals, they are used in thousands of shops and cafes. It also provides e-commerce payment capabilities for businesses, and it also has business banking products.
Takeover offer for Tyro
Tyro said that it has received an unsolicited, non-binding and indicative proposal from a consortium of private equity investors led by Potentia Capital Management to acquire the entire Tyro business.
Other members of the consortium include HarbourVest Partners, MLC Investments and The Construction and Building Unions Superannuation Fund (CBUS).
The offer price was $1.27 per share, with shareholders proposed to have the option to receive their consideration in the form of 100% cash, 50% cash and 50% shares in a privatised Tyro, and 100% in a privatised Tyro.
Potentia also told Tyro that it has entered into a ‘voting and acceptance deed’ with billionaire Cannon-Brookes’ Grok about its 12.5% shareholder in Tyro. Grok will accept a takeover bid made by Potentia or vote in favour of a takeover proposed by Potentia at the offer price. Grok cannot take any action under a competing proposal, unless it’s at least A$0.25 per share better than the most recent Potentia proposal.
The offer included a number of conditions including completing due diligence over six weeks.
Tyro says no deal
The board decided to reject the offer, saying that the offer “significantly undervalues Tyro” and “is not in the best interest of shareholders as a whole.”
The board said there were a few different reasons for the rejection. The board said it’s under the fundamental value of Tyro and it’s opportunistic considering the offer is well below where Tyro’s share price has been over the past year. But that’s down to a number of issues.
There were other reasons, including the offer being highly conditional, that the business has attractive growth prospects as it continues to take share in the Australian payments and business banking markets, it’s expecting strong and improving leverage in the medium-term and it’s well funded and capitalised to support its growth ambitions.
Final thoughts
With how it was worded that Grok can’t take any action unless a competing offer has a value of A$0.25 per share greater than the value of the “most recent” proposal makes me think there will be more offers coming from Potentia and that Tyro is right to reject this initial bid.
It has provided a big boost for the Tyro share price. But, with it still down 56% in 2022, it’s still down a lot. I wouldn’t sell yet if I were a shareholder, but I’m not sure what a good price to buy shares at would be either.
