Potentia withdraws from talks to buy Australia-listed Tyro

The private equity firm submitted an offer of AUD 1.60 per share last December – at an enterprise value of approximately AUD 875m (USD 582m) – proposing to pay shareholders in cash or allow them to roll over into the acquisition vehicle. Tyro’s board granted due diligence access with a view to agreeing to a scheme of arrangement. Potentia has now decided not to proceed with a proposal, according to a filing.

Tyro’s stock dropped 16% on May 22 to close at AUD 1.29, giving the company a market capitalisation of around AUD 653m.

Potentia first moved for Tyro last September with an offer of AUD 1.27 per share. HarbourVest Partners, MLC Investments, and Cbus – all LPs in the private equity firm’s second fund, which closed last year at on AUD 635m – joined the bidding consortium. Grok Ventures, an investment firm controlled by Atlassian co-founder Mike Cannon-Brookes and a 12.5% shareholder in Tyro, agreed to vote in favour of a deal.

Tyro’s board rejected the offer, saying it didn’t reflect the company’s full value. The following month, Westpac confirmed it was in discussions with Tyro over a 100% acquisition. In December, the board said that following extensive discussions with both Potentia and Westpac, no agreements had been reached regarding a deal. Westpac earlier notified Tyro that it would not be making a formal bid.

Potentia immediately responded with the improved offer, having increased its voting power to 16.08% as Cbus, Insignia Financial, and Aware Super all pledged shares in favour of a transaction. The stock peaked at AUD 1.81 in December, having traded as low as AUD 0.60 six months earlier.

The private equity firm was recently involved in the protracted pursuit of another Australia-listed software player, e-signature specialist Nitro Software. An initial bid was submitted last August and Potentia overcame repeated rejections to get due diligence access and secure shareholder support for a AUD 552m take-private. Nitro was delisted last month.

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 2022. 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.

Tyro recently upgraded its guidance for the 2023 financial year, projecting gross profit and EBITDA would hit AUD 194m and AUD 43m, up from AUD 192m and AUD 41m.

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• Topics
• Australasia
• Buyouts
• Technology
• Financials
• Australia
• Fintech
• Potentia Capital
• Grok Ventures