Westpac is likely to be keen on customers rather than any technology edge from Tyro

Westpac has joined NAB as a big-four bank running a ruler over Tyro. Picture: John Gass

Westpac’s motivation for buying the embattled Tyro Payments is understood to be the prospect of winning back customers.

Tyro has had a strong relationship with Bendigo and Adelaide Bank because some of the top four banks disallowed business customers from using Tyro’s payment systems, and Westpac is keen to win those customers over.

Westpac is the biggest bank of the top four for payment systems, which is another reason it likely has interest, but sources say that Tyro’s technology is no more up to date than what it has for the moment, so gaining up to date technology is likely to be less so a motivator.

Westpac confirmed on Tuesday it was looking at the business and it will no doubt be keen to gauge the reaction of the market.

But Tyro, which had been under the watch of recently departed boss Robbie Cooke since it listed three years ago, has plenty of problems to address, including its loss of market share to players with better technology.

DataRoom first revealed on October 4 that one of the top four banks was running the ruler over Tyro, reporting last week that NAB was interested.

Westpac is working with investment bank JPMorgan, and this column reported online on Tuesday that the NAB is working with Bank of America.

Westpac said in a statement to the market on Tuesday that it was in talks to buy Tyro, but there was no certainty that any transaction would result.

“An acquisition would strengthen Westpac’s small business proposition, enabling it to better support customers and grow merchant acquiring, particularly in hospitality and healthcare sectors,” Westpac said in a statement.

Tyro also said in a statement that it had received approaches from several parties expressing interest in a change of control transaction, but none were advanced or definite enough to warrant further disclosure.

ANZ has already launched a partnership with payments provider Worldline, so it would be unlikely to show interest.

A payment technology business provides the opportunity to collect customer data while also gaining the soft technology that sits behind the payments business that it needs for transactions.

Tyro has been shopping itself around the market after private equity firm Potentia Capital bid $1.27 per share, or $658m, for the business in an offer that was swiftly rejected.

Shares in Tyro, which listed in 2019 at $1.36, closed up 3c to $1.59.

A bank will almost certainly bid a far higher price, but Tyro’s largest shareholder, Atlassian co-founder Mike Cannon-Brookes, has 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 if an offer above $1.52 per share does not emerge.

Analysts at Morgan Stanley had suggested an offer of between $2 and $2.50 per share is the going rate for similar companies.

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