Tyro’s share price could ride high on undeterred takeover bid

ASX-listed fintech Tyro Payments could see its share price rise higher following its rejection of a takeover bid involving one of Australia’s top tech entrepreneurs.

Private equity investors are still attempting to convince shareholders to accept the bid, which has received the support of Atlassian co-founder and co-CEO Michael Cannon-Brookes.

Bid rejection boosts Tyro shares

Tyro received an unsolicited bid from a consortium led by Potentia Capital for the full acquisition of the payments company for a price of $1.27 per share, or a total consideration of around $693.9 million.

Headquartered in Sydney, Potentia is a private equity investor that specialises in the software and technology sectors.

Other members of the consortium include HarbourVest Partners LLC, MLC Investments Limited and The Construction and Building Unions Superannuation Fund.

Tyro announced on 8 September that it had rejected the bid, because it ‘significantly undervalues Tyro and, as such, is not in the best interests of shareholders as a whole.’

‘Tyro has attractive growth prospects as it continues to take share in the Australian payments and business banking markets’, said Tyro’s board.

According to the board, the offer from Potentia is ‘materially below Tyro’s fundamental value and highly opportunistic’, given that the price of the offer is well beneath where it has traded over the past 12 months.

Tyro shares leapt 25.89% to $1.24 per share in response to the Tyro board’s rejection of the bid. While this price marks a doubling compared to its historic low of 61 cents per share at the start of July this year, it is still far beneath the latest peak of $4.28 per share in September 2021.

Potentia still undeterred by rejection

Potentia Capital has not given up, with The Australian reporting that it is still trying to convince shareholders in Tyro to accept its offer.

These efforts could receive a boost from the support of Tyro shareholder Grok Ventures, which holds a 12.5% stake in Tyro. Grok is the private investment vehicle of Mike Cannon-Brookes – a co-founder and co-CEO of Australian software giant Atlassian.

Potentia has advised Tyro that Grok will accept its takeover bid at the current price. According to The Australian, Cannon-Brookes also has ambitions to become a co-owner of Tyro in the absence of a better bid.

Tyro posts strong performance in FY22

Founded in 2003, Tyro bills itself as a 'fresh alternative' when it comes to payments and business-only banking.

The company is an authorised deposit-taking institution in Australia, touting its application of smart technologies to tailored EFTPOS solutions and lending and banking solutions for businesses.

Tyro saw a strong performance in FY22, despite the economic uncertainty created by the Covid pandemic both globally and at home in Australia.

According to its FY22 report, transaction value posted 34% year-on-year (YoY) growth to reach $34.2 billion. The compound annual growth rate of Tyro’s transaction value from FY2017 to F72022 was 26%.

Loan originations rose 283% in FY2022 to reach $91.1 million and merchant numbers rose 10% to around 63,770.

Gross profits rose 24% YoY to $148.5 million in FY2022. EBITDA remained positive at $10.7 million, yet dropped 24.6% compared to the FY2021 figure of $14.2 million. Tyro said that lockdowns in the first half of FY2022 accounted for a loss of $5.0 million from EBITDA.

Tyro saw improvements to its operating leverage in the final quarter of FY2022, with a fall to 88.6% compared to 97.5% in the preceding quarter.

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