Australia's Potentia wins majority shareholder approval for Nitro bid

The private equity firm has been pursuing Nitro since August of last year – when it submitted a bid of AUD 1.58 per share – despite being repeatedly rebuffed by the company’s board, seemingly outflanked by a rival bid by a strategic competitor, and reduced to appealing for Australia’s Takeovers Panel to intervene when denied the opportunity to perform due diligence.

Last month, Potentia submitted a cash offer of AUD 2.17 per share, with shareholders able to opt for a full pay-out or roll a portion of their holdings into the acquisition vehicle. The price would rise to AUD 2.20 if at least 75% of shareholders support the bid and to AUD 2.25 if the 75% threshold is crossed and existing shareholders choose to receive at least 25% of the proceeds as rollover equity.

The offer window closes on March 31, but according to a regulatory filing, Potentia said on March 15 that it had already received acceptances amounting to 51.87% of outstanding shares. Nitro’s stock was at AUD 2.20 as of early afternoon on March 20. It was trading around the AUD 1.10 mark when Potentia first expressed interest in the asset.

The Nitro board had already resolved that Potentia’s bid was superior to a final offer of AUD 2.15 per share tabled by Alludo, a Canada-based software provider owned by KKR, and advised shareholders against accepting the Alludo bid.

Alludo’s final offer presented shareholders with a choice: a 100% sale through a scheme of arrangement or an off-market takeover that would give Alludo at least 50.1%. The scheme of arrangement was voted down largely because Potentia has a 19.8% blocking stake, and the off-market takeover offer lapsed.

The Canadian software company entered the fray towards the end of 2022, offering AUD 2.00 per share. As the bidding rose higher, Potentia complained to the Takeovers Panel that the Nitro board was trying to push through the Alludo deal without considering competing proposals. The GP was eventually granted due diligence access after indicating it would pay over AUD 2.20.

In addition to capital from its own funds, Potentia can draw on AUD 220m in co-investment to support. HarbourVest Partners contributed AUD 185m to a warehouse facility while an additional AUD 36m came from a co-investment sidecar established by Aware Super, Potentia’s largest LP, and L Capital, a specialist co-investor.

“Few co-investors have the risk appetite to do blocking stakes and the ability to move quickly when you have two weeks in the data room to come up with a bid. They effectively co-underwrite it and we would syndicate to others once the deal is done,” Michael McNamara, a partner at Potentia, told AVCJ last month.

“The dynamics are very different for private deals where you have more control over the timeframe, but public markets can be irrationally exuberant one way or the other, which creates opportunities for larger deals. Having co-investors who can move quickly is a real strategic asset for us.”

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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• Topics
• Australasia
• Buyouts
• Technology
• Australia
• Potentia Capital
• enterprise software
• Co-investment