Tyro Payments faces investor anger after rejecting Potentia bid as Westpac walks away from talks

Tyro Payments faces an investor revolt after the group dismissed a sweetened takeover bid from Potentia Capital and Westpac ­walked away from takeover talks.

Tyro shares ended Monday almost 20 per cent lower after the company said it would end talks with Potentia despite a revised offer of $1.60 per share.

Tyro Payments faces an investor revolt after the group dismissed a sweetened takeover bid from Potentia Capital and Westpac ­walked away from takeover talks.

Tyro shares ended Monday almost 20 per cent lower after the company said it would end talks with Potentia – which led a consortium including HarbourVest, Cbus and MLC – despite a revised offer of $1.60 per share.

Separately, Westpac notified Tyro, backed by Atlassian billionaire Mike Cannon-Brookes’ Grok Ventures, that it would not submit a takeover offer after deciding a deal was “not in the best interests“ of its shareholders.

The bank said on October 18 it was in preliminary discussions to acquire Tyro, which is the largest non-bank operator of eftpos terminals in the country.

“Westpac has now undertaken due diligence on Tyro and has decided that submitting an offer is not in the best interests of Westpac shareholders at this time,” the bank said on Monday.

Despite the lack of interest from Westpac, Potentia issued a revised, non-binding proposal on Monday at $1.60 per share, valuing Tyro at $875m.

Under that offer, Tyro shareholders would have had options to receive their consideration in cash, half in cash and half in shares, or entirely in shares in an unlisted private Potentia vehicle.

Tyro, however, rejected the revised proposal, which it said “continues to significantly undervalue Tyro and … is not in the best interests of shareholders”.

It said the proposal came at a time of “significant sharemarket volatility and cyclical weakness in global technology and payment company valuations”, with Tyro’s shares trading as high as $2.92 in the past year.

“Tyro remains open to engaging with any credible change of control proposal it receives that represents compelling value for Tyro shareholders,“ it said. “Based on the board’s assessment of the company’s attractive growth prospects in the Australian payments and business banking markets, no such proposal has been received.”

However, some shareholders have expressed frustration over the Tyro board’s dismissal of the revised Potentia offer, noting it represented a 33c uplift on the initial proposal and a 62 per cent premium on the 30-day volume-weighted average price.

QVG Capital portfolio manager Chris Prunty, a Tyro shareholder, said the board had failed to put a “compelling case” to investors about the company’s value despite rejecting the bid on valuation grounds. “$1.60 is not a knockout price so rejecting it isn’t a sin, but with Westpac out of the race, Potentia is perhaps not as far away as they were,“ he said. “We’ll be encouraging the board to engage with any future bid. Why not let shareholders decide?”

Harvest Lane Asset Management chief investment officer Luke Cummings said Potentia’s offer was “not an insignificant increase” to its earlier proposal. He said the near-20 per cent share price dive indicated investors wanted a deal.

“If you look at today objectively … Tyro ran a competitive process and had (National Australia Bank) and Westpac circling … none of it led to anything binding or capable of acceptance,” he said.

Mr Cannon-Brookes, Tyro’s biggest investor through Grok, previously said he was open to selling his 12.5 per cent holding to Potentia for not less than $1.27 per share. However, Potentia noted Grok had raised its price to $1.85 per share or greater following the revised proposal in a deal remaining in place until March 7.

Sources said Grok was disappointed with Tyro’s rejection of the Potentia bid but the company declined to comment.

Tyro has faced leadership upheaval in recent months, with the departure of chief executive Robbie Cooke to Star Entertainment and the looming exit of chairman David Thodey in February.

Tyro on Monday said it was tracking towards the top end of guidance for all operating metrics for the 12 months to June 30.

However, the company said in November that it remained “cautious of the broader macro-economic environment and the impact of interest rate increases to spending in Tyro’s key hospitality and retail verticals”.

Macquarie brokers expect average turnover by terminal to decline by 3.5 per cent in 2024.

Tyro shares ended 29c lower at $1.20 on Monday.