Tyro sinks as suitor walks away from takeover deal

Tyro Payments’ shares fell almost 20 per cent after private equity suitor Potentia Capital Management walked away from a deal to acquire the eftpos payment company.

Tyro Payments’ shares fell almost 20 per cent after private ­equity suitor Potentia Capital Management walked away from a deal to acquire the Eftpos payments company.

Potentia’s $1.60-a-share offer, equating to $832m, had earlier been rebuffed by the Tyro board, but there was hope a higher price would be forthcoming for the firm, whose shareholders include billionaire Mike Cannon-Brookes.

Last month, sources told The Australian’s DataRoom that a deal was on the brink of being ­finalised, valuing the target at between $1.70 and $1.85 a share, with the final hurdle being Tyro’s banking licence and the approval of the Australian Prudential Regulation Authority. It is understood that the most recent negotiations were at $1.75 a share.

But Potentia was not prepared to raise its offering given the country’s economic outlook had deteriorated, with unemployment rising and the Reserve Bank again lifting interest rates.

Founded in 2003, Tyro is Australia’s fifth-largest merchant-­acquiring bank by number of terminals behind the four major banks. The group processed $21.7bn in transactions in the first half of the year from 66,800 Australian merchants.

Tyro, which last year appointed Jon Davey as chief executive, said Potentia’s decision to withdraw came despite it granting due diligence “as well as extensive and advanced negotiation of material commercial terms and draft transaction documents”.

Tyro, which announced last week that it would offer Tap to Pay on iPhone to accept contactless payments, recently upgraded its gross profit guidance to between $192m and $194m.

There has been speculation some of the nation’s biggest banks were last year considering a bid for Tyro as they looked for new revenue streams amid rising pain in the mortgage market and rising competition from other finance firms.

Block, the payments firm controlled by Twitter founder Jack Dorsey, has been expanding in Australia since buying buy now, pay later giant Afterpay this year.

Tyro said it had worked with Potentia to address regulatory requirements to reduce risk to Tyro by providing increased confidence of completion in a reasonable timeframe. Tyro chair Fiona Pak-Poy said the board and management team had worked “with commitment and in good faith” to facilitate a deal that ultimately could not be delivered.

“We have appreciated Potentia’s engagement and are disappointed that they were ultimately unable to deliver a revised offer,” Ms Pak-Poy said.

“While these have been long and drawn-out discussions, the ­refreshed leadership team under Jon Davey has continued to deliver substantial operational achievements.”

Shareholders, which include Grok Ventures, backed by Mr Cannon-Brookes, had been keen on Tyro’s board to accept any improved offer.

Shareholders were lobbying the board to accept a deal as spending demands needed to keep up with that of advanced technology rivals such as Square.

There have even been threats in the background of an extraordinary general meeting to oust the board should a deal not be supported, DataRoom has reported.

Tyro, which announced last week that it would offer Tap to Pay on iPhone to accept contactless payments, recently upgraded its gross profit guidance to between $192m and $194m, and earnings before interest, tax, ­depreciation and amortisation to between $41m and $43m.

Ms Pak-Poy told shareholders earlier this year that the board was “unwavering in our view that any offer for Tyro must take into consideration our attractive growth prospects and the value of Tyro’s banking licence as we continue to take market share in the Australian payments and business banking spaces”.

But she cautioned that the board had been disappointed with the performance of Tyro’s share price during the pandemic and into last year.

Tyro’s shares closed down 16 per cent to $1.28.