POTENTIA DEAL CLOSER TO DONE

From last nights Australian newspaper 24th April 6:06pm:

Potentia a step closer to Tyro Payments deal

Private equity firm Potentia may be finally about to gain control of takeover target Tyro Payments, with suggestions it has agreed to pay a higher price to take out the $800m eftpos payment terminals business.

Sources in the market say that Potentia presented Tyro’s board with an improved offer on Friday.

But given the company did not make any announcement about its negotiations with Tyro on Monday, some believe that the offer may have been due to land on Friday but was delayed, and only of a verbal nature and still subject to a few minor conditions.

Sources described the bid as a “materially improved” to the offer than the $1.60 per share bid it forward to the board in December but was rejected.

Regardless of the technicalities, talk in the market suggests that both parties are finally moving closer towards a resolution.

One of the matters that Potentia will need to resolve will be how to handle Tyro’s banking licence, given that the Australian Prudential and Regulation Authority does not allow private equity firms to own a bank. It has widely been expected that Potentia would shut down the bank should it gain control of Tyro.

There have been recent suggestions that Potentia was prepared to lift its bid to a price somewhere between $1.70 and $1.85 per share.

Shareholders are placing a great deal of pressure on Tyro’s board to accept any improved offer that emerges for the company.

Larger investors in the group, such as Regal Funds with 7 per cent, and the Mike Cannon-Brookes-backed Grok Ventures with 12.5 per cent, are two parties likely to react strongly should another offer be knocked back.

There are even threats in the background of an extraordinary general meeting to oust the board being called should a deal not be supported.

It’s been well over a month since Potentia concluded due diligence on the target.

Tyro shares closed on Monday at $1.54.

Potentia is advised by Jarden Australia and Tyro is advised by Barrenjoey.

It’s a tricky time for private equity firms to carry out buyout proposals.

Market experts are reporting that plenty of funds are looking at targets, but few are executing on transactions at a time that the US Term Loan B market favoured by private equity for borrowing is virtually shut for business when it comes to major buyout transactions.

On Monday, Australian-listed funeral services provider InvoCare said US-based private equity firm TPG Capital had withdrawn its $12.65 per share offer for the group, despite it remaining a 19.9 per cent shareholder.

Sources said that InvoCare’s board had been asking for an offer of $14 per share, a price TPG had been unprepared to pay.

Despite being granted due diligence following its $1.8bn bid, it never signed up to carry out the work, as terms of this would have prevented it from trading in the stock, which meant TPG could not vote its shares for an offer or have made its offer hostile, where it could gradually buy the majority of the company over time by amassing shares.

TPG has nominated Genevieve Gregor, a senior adviser to Collinton Capital Partners, as a director to the board.

Funeral services operators have experienced a lift in earnings following the global pandemic.

Some firms have looked at the sector in the past but walked away, given the trend of people living longer making it less attractive than originally thought.

InvoCare shares closed down 8 per cent to $11.16.