Equity raising possible next option for jilted Tyro Payments

Tyro lost $29.6m for the year to June and $29.8m in the previous corresponding year, and it faces big expenses upgrading its technology to stay competitive. Picture: iStock

Questions are being raised as to whether an equity raising will be on the cards for Tyro Payments after Westpac abandoned plans for a potential offer and the Eftpos payments terminal provider rejected a revised $831m bid from Potentia Capital.

Tyro’s adviser, Barrenjoey, was understood to have sounded out investors in recent weeks about what offer they would be willing to accept.

While shareholders indicated they would be keen for a deal at $2 a share, what appears to have been lost in translation is that they would have also been keen for the Tyro board to engage if another offer came in below that. Shareholders are understood to be unhappy at the outcome, where Tyro has called off the sale process and ended all talks with interested buyers.

This includes shareholder and Atlassian co-founder Mike Cannon-Brookes, who owns 12.5 per cent of the stock through his Grok Ventures.

One possibility is that shareholders place so much pressure on the board it changes its stance. Potentia, advised by Jarden, could slightly alter the terms of its most recently lobbed offer of $1.60 a share to gain acceptance from the company in what could be a face-saving move for the board, led by outgoing chairman David Thodey.

Westpac was earlier thought to be a keen acquirer. It was not only price that deterred the top four bank, but it felt it was not the right time to do the deal.

Westpac is understood to have looked at Tyro as a way to gain customers and possibly considered buying the business was a cheaper way to upgrade its own technology.

Those close to Tyro are confident another buyer will emerge at a higher price. But right now, it is hard to see that happening, as shares plunged 29c on Monday to close at $1.20.

Recently appointed Tyro chief executive Jonathan Davey now has the job of turning around the company’s performance towards profitability – no easy exercise.

Tyro lost $29.6m for the year to June and $29.8m in the previous corresponding year, and it faces big expenses upgrading its technology to stay competitive.

It operates in an environment where it is up against the banks and companies such as Afterpay’s owner Block that are on technology’s cutting edge.

For this reason, some believe an equity raising would be needed.

It’s been a rough few days for Potentia. Its Tyro offer has been rebuffed after it was also out-bid on its other takeover target, Nitro Software, with KKR lifting its offer at the weekend by 15c to $2.15 a share.