Bain Capital is preparing to launch the $2.8 billion initial public offering of its accounting software firm, MYOB, as early as Tuesday in what is likely to rank as the largest float of the year.
The US-based private equity firm looks on course to raise between $700 million and $800m from institutional fund managers with the business scheduled to debut on **promotion blocked** at the end of April.
MYOB ranks as one of the most keenly anticipated listings of 2015 with investors encouraged to value it in line with US giant Intuit, which has a market capitalisation of over $27 billion.
Index funds are likely to account for a sizeable portion of the fresh equity in the company because of its likely inclusion in the ASX benchmarks.
The green light for the deal also confirms a pick-up in capital markets activity.
Chevron last week completed the biggest ever block trade in Australia with the sale of its 50 per cent stake in petroleum marketer Caltex for $4.6bn in a deal led by Goldman Sachs.
According to institutional fund managers, the MYOB offer has been positioned to reward all if targets are met because the full year 2015 forecasts are seen as easily achievable.
As revealed by The Australian, MYOB will be chaired by former Telstra executive Justin Milne, a stalwart of the technology industry and a board member of NBN Co.
His other non-executive directorships include Tabcorp, Members Equity Bank and NetComm Wireless.
Bain’s listing of MYOB investment comes as the Australian sharemarket continues a prolonged bull run, fuelled by yield-hungry investors pushing up valuations.
Technology valuations have also been running hot with rival cloud-based accounting software group Xero’s shares up 54 per cent since December, following a $US100m capital injection from renowned US investors Accel Partners.
The price gain values Xero at $3.2bn despite the company having yet to report a profit and being forecast to generate just $126.6m in revenue for the financial year ending March 30.
Bain is looking to capitalise on this sustained market strength, with the float valuation for MYOB more than double the price it paid less than four years ago to acquire the firm.
Fellow private equity firm Archer Capital and several smaller co-investors sold the business to Bain in 2011 for $1.1bn, having bought it for $558m.
That deal resulted in a legal tussle with an underbidder, the British-based software giant, The Sage Group, which accused Archer of running a secret auction to ramp up the price.
The advance into public ownership has also turned into a public battle, with MYOB’s management forced to answer criticisms from its fiercest rival in Australia, the New Zealand-based Xero.
The company, which makes cloud-based accounting software for small businesses, accused MYOB of inflating customer numbers ahead of the IPO and described its claimed user base of 1.2 million customers as “dodgy”.
The remarks by Xero’s boss, Rod Drury, were vigorously denied by MYOB’s boss, Tim Reed, who insisted their reporting has been “robust, transparent and consistent”.
MYOB has cornered up to 65 per cent of the market for small to medium enterprises.
Analysts at Citi predict the company’s revenue will jump by 8 per cent to $323 million with EBITDA to expand by 17 per cent to $159.6m in 2015.
The drive into cloud-based software will represent the main growth channel, a segment in which Xero is particularly strong, especially in Britain where it has reportedly overtaken Sage.
Four banks — Citi, Macquarie, Bank of America Merrill Lynch, UBS and Goldman Sachs — will handle MYOB’s float while Reunion Capital Partners are acting as Bain’s financial adviser.
