ACCC spooks bank’s interest in Eftpos provider

Tyro investors are betting that an acquisition by a bank is likely.

NAB was understood to be close to embarking on an acquisition of Tyro Payments at the start of this month, say sources.

However, after being on the brink of signing up for exclusive due diligence for the Eftpos payments provider, the top-four bank retreated after becoming concerned it could gain the attention of the Australian Competition and Consumer Commission.

This is after NAB has already consolidated in the banking space with its acquisition this year of Citi’s local retail banking operations.

The concern is not just on NAB’s share of the electronic payments market in the retail space, of which it holds between 8 and 9 per cent, but in the payment-for-healthcare space with its HICAPS healthcare payments business.

Tyro has about 5.1 per cent of the card payment market in Australia.

Should the competition watchdog look at electronic payments market concentration in specific industries rather than across the board, NAB could face opposition to buying Tyro.

DataRoom reported that one of the top-four banks was said to be looking at Tyro, at the time that Tyro was in negotiations with NAB.

In recent days, Westpac came out in the market and confirmed that it, too, was looking at Tyro, but as of late last week it was yet to progress the talks to exclusive due diligence.

While NAB has the largest share of the business banking market, Westpac’s motivation for buying Tyro is said to be winning back customers from Bendigo and Adelaide Bank, which currently has a strategic relationship with Tyro.

Westpac has the largest share of the electronic payments market of any of the top-four banks.

ANZ has already launched a partnership with payments provider Worldline.

NAB wants to get bigger in small business, and a payment technology business provides the opportunity to collect customer data while also gaining the soft technology that sits behind the payments business which it needs for transactions.

The deterrent to buying Tyro, though, is that technology is changing rapidly and Tyro’s payment machines are now in competition with more sophisticated technology provided by groups like Square.

Investors are certainly betting that an acquisition of Tyro by a bank is more likely than not – its shares closed on Wednesday at $1.49, higher than an earlier offer.

The largest shareholder, Atlassian co-founder Mike Cannon-Brookes, agreed to deal his 12.5 per cent stake, which he owns through his private company Grok Ventures, to Potentia, backed by former MYOB boss Tim Reed and ex-Archer Capital executives.

That is, unless another offer emerges higher than $1.52 per share.

Potentia earlier put forward a $1.27 per share offer that was rejected as too low.

Shareholders bought in at $2.75 per share for Tyro’s initial public offering in 2019, but some now want to cut their losses.

Westpac is working with JPMorgan while NAB is working with Bank of America.