Private equity giant KKR increases bid for MYOB

MYOB has agreed to open its books to KKR after the US private equity firm sweetened its bid for the accounting software company to $3.77 a share, valuing the company at $2.2 billion.

KKR last month made an unsolicited $1.75 billion offer for MYOB pitched at $3.70 a share after snapping up a 17.6 per cent stake from investment firm Bain Capital to take its holding to 19.9 per cent.

The private equity firm's bid remains subject to conditions, including KKR's completion of due diligence and the resolution of its financing arrangements.

MYOB CEO Tim Reed. Credit: Jessica Hromas

MYOB shares jumped 19.1 per cent to $3.55 on the back of KKR's initial bid. On Friday, they closed 5.36 per cent to $3.54 but are still trading well below the bid price.

The Xero challenge

If successful, the deal would be one of KKR's biggest acquisitions in Australia and add to its 10-strong stable of technology businesses in the Asia-Pacific region.

"My read of is they have raised the offer price to gain access to do due diligence, so that indicates a step forward," said Jules Cooper, an analyst at stockbroker Ord Minnett.

Once the dominant provider of accounting software to small and medium-sized businesses in Australia, MYOB has been outpaced in recent years by ASX-listed cloud and administrative software company Xero.

The two platforms service more than 80 per cent of the market, according to Wilsons Equity Research, however, Xero's market value, at around $5.8 billion, is around three times that of MYOB.

"We are pleased with Xero’s continuously improving leadership position in the small business accounting market and with our large retail shareholder base, many of whom are our customers and partners," a spokesperson for Xero said.

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 about the deal.

Milne review

An independent MYOB board committee, headed by MYOB chairman and former ABC chairman Justin Milne, and including Anne Ward, Andrew Stevens and Fiona Pak-Poy, was formed after KKR made its initial bid.

MYOB said the board would continue to assess and evaluate developments in relation to KKR's bid for the business.

KKR said at the time of its first bid that it wanted a unanimous recommendation from MYOB's board to close the deal.

UBS is acting as financial adviser and Clayton Utz as legal adviser to MYOB.

with Reuters

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