By Emma Koehn
Accounting software group MYOB Group says it is business as usual as it considers a $1.75 billion buyout offer from private equity firm KKR & Co, which prompted a 20 per cent surge in its share price in the first minutes of trade on Monday.
MYOB told the market on Monday morning it was being courted by the multibillion-dollar investment firm with an unsolicited takeover offer pitched at $3.70 a share.
MYOB chief Tim Reed.Credit: Peter Braig
MYOB shares closed 19.1 per cent higher at $3.55 - levels not seen since January - to finish the day as the top mid-cap ASX gainer.
KKR offered to buy the shares it doesn't already own in the cloud services provider after bagging a 17.6 per cent stake in MYOB from investment firm Bain Capital. It paid about $327.4 million, or $3.15 a share, for the stake from Bain to build its holding in MYOB to 19.9 per cent.
The proposed buyout price represents a 24 per cent premium to MYOB's last closing share price of $2.98 and values the company at $2.18 billion. Bain, which bought the then privately owned MYOB in 2011 and listed it in 2015, still holds about 6.1 per cent of MYOB.
"With 19.9 per cent of the register, KKR effectively own a blocking stake in the company. We think this could be enough of a deterrent for a potential interloper," JPMorgan analysts said in a note.
MYOB said in a statement its board had started an assessment of the proposal.
But the business software provider assured its small business client base that regardless of the proposal, services would continue as usual.
"The notice of a non-binding offer has only just been received by the board and it is too early to speculate on potential outcomes resulting from this proposal. The board is considering the offer and there are no changes to MYOB as a company or any of its products or strategies," a spokesperson for the company told Fairfax Media.
"We are focused on delivering fantastic products and experiences, and providing ongoing support for all our valued clients and partners."
MYOB told Fairfax it would not speculate on the time frame for the potential acquisition, including how long it would take the board to consider the unsolicited proposal.
Once the dominant provider of accounting software to small and medium-sized businesses in Australia, MYOB has in recent years struggled to compete for market share with global cloud and administrative software company Xero.
Together they service more than 80 per cent of the market, according to Wilsons Equity Research, although the research also shows Xero's growth in Australia has outpaced MYOB's. Xero's market value, at around $US6.88 billion, is more than three times that of MYOB's.
Xero has gained 67 per cent over the past 12 months and was sitting at $48.76 on Tuesday afternoon.
MYOB announced at its half-year results in August it was on track to hit 1 million business users by 2020. Revenue was up 7 per cent in the half to $218 million, but net profit fell 6 per cent to $46 million.
MYOB abandoned a $180 million plan to acquire rival accounting management software business Reckon in May, saying at the time the regulatory process had taken longer than expected. The Australian Competition and Consumer Commission had expressed concerns the deal would mean MYOB would be the only provider of practice software for small and medium accounting businesses.
But the company has spent $4.7 million on acquisitions this year, including data reporting operation MyAdvisor for $2.5 million and corporate compliance tool CompanyIQ for $2.2 million.
JPMorgan analysts said that at this stage, it was unlikely strategic investors such as Sage Group, which had attempted to buy the company back in 2011, and American peer Intuit, maker of popular software QuickBooks, would rival KKR's bid.
An Australian-based spokeswoman for Intuit said it did not comment on market speculation.
Sage did not immediately return an email seeking comment outside of office hours.
KKR's proposal for MYOB comes after it acquired Australian non-bank lender Pepper Group for about $US682 million last year. The global investment firm had $US190 billion in assets under management as of June 30.
with Reuters