Potentia’s Andrew Gray, Tim Reed swoop on Tyro Payments with $658m takeover bid

A consortium led by Potentia’s Andrew Gray and Tim Reed have lobbed an unsolicited takeover bid for the payments company.

Shares in payments-focused tech business Tyro surged on Wednesday after the company knocked back an “opportunistic” takeover bid from a consortium led by Potentia, the Sydney-based private equity firm run by former Archer Capital managing director Andrew Gray and ex-colleagues Tim Reed and Michael McNamara.

Tyro shares climbed by 28 per cent to close at $1.28 at after it rejected the unsolicited bid, which would have valued its business at more than $685m.

The consortium, which also includes HarbourVest Partner, MLC Investments Limited and The Construction and Building Unions Superannuation Fund, was offering Tyro $1.27 per share, a 29 per cent premium to the company’s closing share price on Wednesday. The offer, which would take Tyro private, has conditional support from Tyro’s largest shareholder, Mike Cannon-Brookes’ family office Grok Ventures, which owns 12.5 per cent of the company.

“We believe Tyro requires a level of business transformation that can be best undertaken under private ownership,” Mr Reed and partner Andrew Joyce wrote in a letter to Tyro management.

“Potentia Capital is uniquely placed to assist Tyro deliver this transformation given our strong experience in B2B software and payments, track record of helping Australian software businesses scale, and the significant capital and resources Potentia can bring to support organic and inorganic growth.

“We would like to reiterate that we believe Tyro is an excellent fit with our investment strategy and partnership model. We have a full team of investment executives and advisers on standby and are focused on delivering an efficient and expeditious path to an agreed transaction.”

A spokesman for Potentia said the private equity firm would not be “aggressive” in its approach.

The conditional support from Grok includes a deed that means Grok “cannot take any action under a competing proposal, unless that proposal has a value of 25 cents per share greater than the value of the most recent Potentia proposal.”

Tyro’s board in a statement labelled the bid ‘opportunistic.’

“The board has considered the indicative proposal including with the assistance of its financial and legal advisers and unanimously determined the indicative proposal significantly undervalues Tyro and, as such, is not in the best interest of shareholders as a whole,” Tyro’s board, led by ex-Telstra chief executive David Thodey, said.

“The board has therefore determined to reject the proposal in its current form.”

Tyro’s board is also currently looking for a new chief executive, with current CEO Robbie Cooke moving to The Start Entertainment Group later this year.

Tyro shares rallied more than 32 per cent to $1.30 following news of the takeover bid. They closed up 27.9 per cent at $1.26, slightly below the offer price.

The company is the fifth-largest provider of Eftpos terminals in Australia, sitting just behind the big four banks. It debuted on the ASX in late 2019 at $3.38.

Tyro has appointed Barrenjoey as financial adviser and Clayton Utz as legal adviser in relation to the proposal.

Meanwhile another ASX-listed tech Nitro Software released a letter to shareholders outlining the reasons why it did not like a $400m bid by the same parties made on August 30 and rejected on August 31. The $1.58 per share bid for Nitro Software came after Potentia secured a 17 per cent stake in the business.

Nitro, like Tyro, has deemed Potentia‘s bid as being opportunistic at a time of market volatility.

“The board’s strong belief is that the timing of the approach by the Potentia Consortium is highly opportunistic and comes during a period of significant share market volatility and cyclical weakness in global technology company valuations,” Nitro Software chairman Kurt Johnson said in a letter.

“From discussions with our largest shareholders in the past week, we know that many share the board’s view that the indicative proposal is opportunistic and fundamentally undervalues the company, with several of our Top 10 shareholders having now expressed these views both privately and publicly.”