US player Shift4 joins Tyro Payments for Smartpay play: sources

A Tyro Payments eftpos machine. Picture: Supplied

US-based payments company Shift4 Payments has emerged as a suitor of Smartpay, say sources, as the Australian listed Tyro Payments also confirms it is bidding for the company.

Shift4, based in Pennsylvania and listed in New York, processes payments for over 200,000 businesses in the retail, hospitality, leisure and restaurant industries and specialises in commercial solutions such as mobile payment software and hardware.

The $385m Tyro confirmed on Monday that it has issued a non-binding indicative offer to Smartpay, which included an offer to buy all the Smartpay shares at $NZ1 per share, mostly consisting of Tyro shares as well as a cash component.

The proportion was to be determined.

Smartpay confirmed that it had received two separate conditional, non-binding and indicative proposals, one from Tyro and another from an “international strategic”.

Sources say that the group is a second unidentified suitor also vying for the $NZ128m New Zealand listed Smartpay is Shift4.

Both groups have been offered due diligence non-exclusively and on a reciprocal basis.

Smartpay shareholders are welcoming what they believe is a strong offer for the business, at a 70 per cent premium to the last closing price, while Tyro shareholders are keen to find out more on the synergies from a prospective deal after being disappointed the group rejected a buyout proposal in 2022 and has not followed through on capital management initiatives.

Working with Smartpay is appointed Morgan Stanley and law firm Bell Gully while Tyro is advised by Barrenjoey.

Tyro said it was in preliminary talks with Smartpay regarding the proposal.

 Tyro’s own offer of $1.60 per share buyout proposal came in 2022, equating to an equity value of $832m from Sydney private equity firm Potentia Capital, but it was rebuffed by the company’s board.

This was after an earlier $1.27 per share offer was rejected.

Due diligence was offered to Potentia in the hope it would lift its offer, but it walked away.

Now the Tyro share price is at 74c.

Tyro describes itself as a payments company with more than 73,000 merchants across Australia with in-store, online and on-the-go payment solutions.

It has at least 450 partners, offering services in hospitality, retail, services and health providers, and with a bank licence, it provides what it says are integrated banking and lending solutions for business.

In 2023, shareholders were urging Tyro to give up its banking licence to free up capital to invest in technology and grow its core business of electronic payments through eftpos machines.

But at the Macquarie Australia Conference last year, chief executive Jonathan Davey said Tyro remained committed to retaining the banking licence because it was an important part of the business.

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.

Motivating factors for Tyro to buy the business, say analysts, include taking out a competitor, but also, moving the business from a hardware leasing model to a full payments model.

It has its own in-house payments switch to process payments but Smartpay calls on the services of Cuscal for its payments.

Adding extra scale to its business would help Tyro in this area.

In New Zealand, Smartpay has about 25 per cent of the terminals market, but its payments are handled by big banks.

The transaction would be an opportunity for Tyro to take that payments market share away from the banks and bring it in house.

In Australia, Tyro has less than 10 per cent of the payments market but about 20 per cent of the hospitality market, whereas Smartpay has about 1 or 2 per cent.

On Smartpay’s board is Carlos Gil of Microequities Asset Management, which is also a Smartpay shareholder.

He would likely excuse himself from considering the offers due to a conflict of interest, say sources.

Wilsons Advisory analyst Cameron Halkett said Tyro’s rival for Smartpay could outbid Tyro.

While not named, the analysts said they had reason to believe it may be Shift4, a global payments consolidator with an increased desire to gain a presence in the Australia and New Zealand region.

“If the unnamed Strategic is who we believe it is, they would comfortably have greater firepower than could Tyro, risking Tyro potentially overpaying if they remained hellbent on securing Smartpay.”