TPG, Potentia pursue Australia's Smartgroup
TPG Capital and Potentia Capital have submitted a buyout offer for employee management services provider Smartgroup that values the Australia-listed business at a market capitalization of A$1.38 billon ($993 million).
Supported by Aware Super, which will participate as a co-investor, they are looking to acquire all outstanding shares for A$10.35 apiece, a 32% premium to the September 28 close. Smartgroup’s stock opened at A$9.61 the following day before falling back to close at A$9.28.
The company said in a filing that the consortium would be allowed to conduct due diligence on an exclusive basis. Its board has yet to endorse any offer.
Smargroup was founded in 1999 as an online salary comparison engine. Through a string of bolt-on acquisitions, it has since expanded into salary packaging, whereby employees sacrifice a portion of their salary in return for fringe benefits paid for by the employer. It can help reduce tax exposure.
Smartgroup is one of the leading providers of outsourced salary packaging to the not-for-profit sector in Australia. It works with more than 1,600 non-for-profit organizations nationwide, serving the likes of community and charity workers.
Other employee management services include outsourced fleet management programs – such as pool vehicle booking and fleet car-sharing – and payroll administration solutions. Healthcare providers are a key customer base.
At the end of 2020, Smartgroup had 360,500 individual salary packaging customers and 24,900 fleet vehicles under management.
Revenue fell from A$249.8 million in the 12 months ended December 2019 to A$216.3 million in 2020, largely because of COVID-19. Net profit dropped from A$61.3 million to A$41.4 million. In the first half of 2021, revenue held steady at A$109.4 million and net profit rose 54% to A$26.6 million.
Potentia, which was established by Andrew Gray, formerly of Francisco Partners and Archer Capital, and ex-MYOB CEO Tim Reed, has done well in the human resources technology space. Earlier this year, it sold Ascender to US-based Ceridian for around $500 million, securing a 30x return for the earliest investors.
The firm closed its debut fund at about A$400 million last December. Aware Super is among the LPs.
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