Australia's Potentia pursues two technology take-privates
Australia-based specialist B2B technology investor Potentia Capital appears to be continuing its pursuit of two listed companies – Nitro Software and Tyro Payments – despite several rejections.
The private equity firm first moved for Nitro at the end of August, submitting an offer of AUD 1.58 per share in partnership with HarbourVest Partners. HarbourVest is one of the LPs in Potentia’s second fund, which closed a couple of months earlier at the hard cap of AUD 635m (USD 429m).
Nitro rejected the bid, saying it didn’t reflect the company’s true value and coincided with a period of significant stock volatility and cyclical weakness in valuations in the technology space globally. In October, Potentia – which had by that point accumulated a 19.8% interest in the company – announced its intention to make an unsolicited off-market takeover bid of AUD 1.80 per share.
Nitro’s board also rejected this offer. It simultaneously disclosed that Alludo, a Canadian software company, had submitted a bid of AUD 2.00 per share through a scheme of arrangement and had been granted a 21-day period of exclusivity to conduct further due diligence.
Potentia returned in November, asking to engage with Nitro over a revised bid offer that would match or exceed the Alludo proposal. It added that it was willing to alter the terms so existing shareholders could roll over their interests. The private equity firm was rebuffed by Nitro’s board, which said the revised proposal couldn’t reasonably be considered likely to better the Alludo bid.
The board subsequently recommended that shareholders vote in favour of Alludo’s scheme of arrangement. Potentia formalised its revised proposal earlier this month, offering AUD 2.00 per share, only to be rejected once again. Earlier this week, Alludo responded by upping its bid to AUD 2.15 per share, a 90% premium to the August 29 closing price.
The company’s stock climbed 5.6% on December 12 to close at AUD 2.23, which translates into a market capitalisation of around AUD 544m.
Potentia submitted a non-binding offer for Tyro of AUD 1.27 per share – giving shareholders the choice of 100% cash, 100% rollover, or a 50-50 split between the two – a matter of days after it first targeted Nitro. HarbourVest once again joined the consortium, alongside MLC Investments and Cbus. MLC and Cbus are also Potentia LPs.
The consortium reached an agreement with Grok Ventures, an investment firm controlled by Atlassian co-founder Mike Cannon-Brookes, to acquire its 12.5% interest in Tyro should the proposed scheme of arrangement proceed. Grok agreed not to consider a competing proposal unless it was worth at least AUD 1.83 per share.
Tyro’s board rejected the bid. In October, it began preliminary discussions with Westpac over a potential acquisition. This week, the board said it had ended discussions with both Potentia and Westpac because neither had submitted a bid that valued Tyro fairly. This is despite Potentia increasing its offer to AUD 1.60 per share, giving the company an enterprise value of AUD 875m.
The private equity firm has nevertheless increased its interest in Tyro to 16.08%. Tyro’s stock fell 19% on December 12 to close at AUD 1.20. It rallied to AUD 1.37 during the morning session on December 13, giving the company a market capitalisation of AUD 711.4m.
Nitro claims to be one of only two software companies globally with a proven enterprise-grade software-as-a-service (SaaS) PDF productivity and e-signing platform. It has more than 2.8m licensed users and over 13,000 business customers in 155 countries. Customers include two-thirds of the Fortune 500 constituents and three of the Fortune 10 members.
Revenue reached USD 50.9m in 2021, up from USD 21.2m a year earlier, while the subscription share of overall revenue increased from 53% to 66%. EBITDA remained negative, widening from USD 6m to USD 18.6m, while a net loss increased from USD 7.5m to USD 21.7m. Annual recurring revenue rose from USD 28.5m to USD 40.1m, with a gross margin of 92%.
Tyro is a neobank specialising in electronic funds transfer at point of sale (EFTPOS). It claims to be Australia’s largest player in this space outside of the country’s big four banks, providing EFTPOS services, business loans, and banking solutions to more than 67,000 local businesses. The company also offers Medicare and private health fund claiming and rebating services.
It processed AUD 34.2m in transactions during the 12 months ended June. Revenue for the period came to AUD 326.1m, up 36.2% year-on-year, while EBITDA fell 24.7% to AUD 10.7m and the company’s net loss narrowed slightly to AUD 29.6m.
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