Is NAB getting serious about Tyro Payments?

NAB wants to get bigger in small business, and a payment technology business provides the opportunity to collect customer data.

New Tyro Payments boss Jon Davey appears to be in a hurry to cut costs, with the provider of eftpos and private health fund claiming and rebate services embarking on a new strategy to take some $11m costs out of the business per year. As Morgan Stanley analysts led by Andrew McLeod put it on Monday: “Not large, but incrementally positive.”

Tyro recently knocked back a $1.27 per share indicative bid from Potentia Capital and HarbourVest – which incidentally had the support of Atlassian founder Mike Cannon-Brookes’ Grok Ventures.

On Tuesday, The Australian’s DataRoom column reported that one of the country’s major banks was also considering making a bid for the company. Most in the market, DataRoom reported at the time, still believed a private equity buyer was more likely.

But National Australia Bank is seriously considering an offer, sources close to negotiations say. A bank spokesman declined to comment on Monday.

NAB wants to get bigger in small business, and a payment technology business provides the opportunity to collect customer data. It would also allow the bank to gain the soft technology that sits behind the payments business that it needs for transactions. But Tyro is now in competition with sophisticated rivals, including Block, the payment company previously known as Square, which purchased Afterpay in late 2021.

Tyro, which also declined to comment, is being advised by Clayton Utz and Barrenjoey. The company was presenting to their private equity suitors in late September, hoping takeover talks continue at a higher price.

The Potentia bid was, as JP Morgan analyst Bob Chen wrote to clients at the time, “highly opportunistic” but left “room for further bids to come”.

“Loan originations have been hampered by the onset of Covid-19; however we expect this will likely recover as lockdowns are eased and Tyro’s merchants resume their operations,” Chen wrote. “We see opportunity for Tyro to offer these products to its growing number of merchant.

“The SME lending market is vast and grossly underserved; we believe Tyro’s innovative product, combined with deep transaction data, will assist (it) in penetrating this market.

Any potential suitor would likely have to make an offer of more than $1.50 per share to find interest with the Tyro board and with Grok, which owns a 12.5 per cent stake in the business.

Shares closed up 2.4c, or 1.7 per cent, at $1.51 on Monday. Tyro had traded as high as $4.38 before the Covid-19 pandemic, before subsiding to as low as 61c in July. It listed in 2019 at an offer price of $2.75 per share.