
Potentia gains due diligence access to Australia's Nitro

Potentia Capital has been invited to perform due diligence on buyout target Nitro Software after trumping a rival bid for the listed Australian company, ending months of board resistance to its overtures.
The PE firm has indicated it is willing to pay AUD 2.20-AUD 2.30 per share, which translates into a market capitalisation of up to AUD 579m (USD 402m). With Alludo, a Canada-based software provider owned by KKR, unwilling to go beyond AUD 2.15, Potentia has been granted due diligence access. However, the Nitro board continues to endorse Alludo’s offer, according to a filing.
Potentia has AUD 430m in equity available, including AUD 209m in undrawn commitments from its first fund and capital from its second fund, which closed last June on AUD 635m. HarbourVest Partners, identified as a co-investor when Potentia first moved for Nitro in August 2022, has agreed to put in AUD 185m.
The private equity firm has an additional AUD 36m at its disposal from Aware Super, a local superannuation fund, and L Capital, a specialist co-investor based in San Francisco. This is the remainder of a AUD 112m pool earmarked for co-investment alongside Funds I and II.
Should Potentia’s latest bid prove successful, it would be paying 46% more than the initial offer of AUD 1.58 per share. This was rejected, prompting the private equity firm to announce an unsolicited off-market takeover bid of AUD 1.80 per share. Around the same time, Alludo entered the fray with an offer of AUD 2.00 per share.
There followed a tit-for-tat exchange as the price moved higher and the competing parties picked holes in one another’s proposals. On two occasions, Potentia appealed to Australia’s Takeovers Panel to intervene, claiming that Nitro’s board was effectively trying to push through the Alludo deal without giving due consideration to competing proposals.
When Alludo submitted its most recent bid of AUD 2.15 per share, it was conditional on Nitro confirming that it would not grant due diligence access to Potentia. This was eventually dropped from the proposal. However, Alludo could do little about Potentia’s 19.8% stake in Nitro, which enabled the private equity firm to vote down any scheme of arrangement.
Consequently, shareholders were given a choice: a 100% sale through a scheme of arrangement or an off-market takeover that would give Alludo at least 50.1%.
Potentia’s latest bid also included a choice: an all-cash offer of AUD 2.00 per share; an all-scrip sale comprising 70% equity in the acquisition vehicle and 30% preference shares that could be redeemed against the acquisition vehicle; or a cash-and-scrip sale with an even split between the two.
Alludo’s scheme of arrangement failed to meet the 75% approval threshold. The window for the off-market takeover was scheduled to open on February 10 – and Alludo had built up a 12.53% position to boost its chances of reaching 50.1% - until Potentia suggested it could go as high as AUD 2.30.
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.
Revenue reached USD 66.8m in the 12 months ended December 2022, up 31% year-on-year, while subscription revenue rose 50% to USD 50.6m. Operating EBITDA remained negative, although it narrowed from USD 18.6m to USD 11m. Annual recurring revenue rose 27% to USD 58.8m.
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