Bain-owned MYOB targets $638m in Australia IPO

Up to 277.2 million shares will be put on sale, priced at A$3.00-4.00 apiece, according to a prospectus. This would give the company a market capitalization of A$2.26 billion if the shares price at the top end of the range. Bain's 56.75% stake in the business post-listing would be worth A$1.35 billion.

The PE firm acquired MYOB from Archer Capital and HarbourVest Partners in 2011 for around A$1.3 billion, overcoming competition from KKR and Sage Group, the latter abandoning what appeared to be a winning bid late in the process. The equity portion of Bain's offer was said to have been just under 50%. It was supported by A$530 million in senior debt plus a vendor note for a leverage multiple of 6.5x.

MYOB issued A$155 million in subordinated notes in December 2012, of which A$53.8 million was used to pay down some of the debt used to finance Bain's acquisition. The remainder was returned to the private equity firm. These notes will be redeemed after the IPO. In September 2014, MYOB secured A$640 million from lenders to refinance its debt and make a further distribution to Bain.

As of December 2014, the company was carrying senior debt of A$619.5 million, up from A$474 million a year earlier. The vendor note - provided by Archer and HarbourVest in 2011 - had a book value of A$227.7 million. It will also be redeemed after the IPO, which means the lenders will receive A$292.5 million, including break fees.

The proceeds of the offering, plus A$437 million in new banking facilities, will be used to take out all existing liabilities. These include A$127.2 million in redeemable preference shares held by Bain and A$6.9 million held by company management.

MYOB provides business management software solutions to more than 1.2 million small and medium-sized enterprises (SMEs) and 6,400 larger companies in Australia and New Zealand. Australia accounts for 83% of its revenue. The company claims to be the market leader in each country for accounting software and practice software, with a 60-65% share. It also provides enterprise software solutions.

There are approximately 2.5 million SMEs in Australia and New Zealand. MYOB expects its business to be driven by a rise in this absolute number as well as increasing penetration of accounting software - including cloud-based solutions - and the cross-selling of different products to customers.

The company reported a pro forma net profit of A$70.1 million for the 2014 financial year, up from A$64.8 million in 2013. Revenue rose from A$275.5 million to A$299.3 million over the same period. It expects net profit and revenue of A$84.8 million and A$323 million in 2015.

The IPO is being managed by Citi, Goldman Sachs, Merrill Lynch and UBS.

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