Tyro woos investors with buyback hint, as suitors move on

Tyro provides Eftpos payment services. Picture: iStock

Tyro Payments’ boss Jonathan Davey may have been giving little away at the Macquarie Australia Conference about whether it still had any suitors knocking at its door, but its share price says it all.

Once the centre of a takeover battle with Potentia, the eftpos payment service provider’s shares are now 96c and its market value $482m after it knocked back an offer of $1.60 a share from the Sydney-based private equity firm in December 2022.

Now the Fiona Pak-Poy-led board faces a dilemma, where after rejecting an offer at that price, it will be difficult to justify accepting a lower offer from a group that may be keen to buy the business.

Possible buyers likely see the writing on the wall.

Tyro Payments still has its loyal supporters – its share price climbed more than 4 per cent to 96c by the market close after Mr Davey’s presentation on Tuesday.

But the room that may have once been packed when the stock was a market darling was only half to three quarters full in what was one of the first companies up to present at the Sydney conference.

In many ways, Tyro appears to be doing many of the right things.

It plans to capitalise on its success in the healthcare payments space, where it holds a dominant position.

More crowded and less profitable areas like hospitality it would leave to global competitors to dominate.

And it was open to acquisitions if they make sense (it won’t say what it plans to buy), because as a payments company, it needed scale to grow.
It also raised the possibility of a buyback with its robust balance sheet, something that may have fuelled the share rally.

But it has lost not just its shine what with rivals emerging with competitive technology, but some of its once loyal supporters.

One fund manager asked by DataRoom at the conference as to why they were not listening in on Tyro Payments said that they sold out of the stock because it would not get rid of its banking licence, which meant it required Australian Prudential Regulation Authority approval to carry out a share buyback.

They believed it remained a drain on capital, what with adhering to all the obligations from APRA.

But Mr Davey said Tyro remained committed to retaining the banking licence because it was an important part of its business.

Investors have previously argued that offloading the bank licence would free up capital to invest in technology and grow its core business of electronic payments through eftpos machines.

Initially, the strategy was to use the bank to grow its customer numbers.

The expectation was always that private equity firm Potentia would hand back the banking licence if it acquired Tyro Payments.

Tyro, which floated at $2.75 a share in 2019 as a $1.36bn company, has counted Grok Ventures, the private company of Atlassian co-founder Mike Cannon-Brookes, as a substantial shareholder, along with Regal Funds and Wilson Asset Management.

NAB and Westpac considered an acquisition of the business for its customers and technology but walked away.

Some say the most logical buyer is a global strategic player.