Global investment company KKR & Co has launched an offer to buy Australian software accounting business MYOB Group for $1.2bn.
The full takeover offer comes after KKR bought nearly one-fifth of MYOB as it looks to expand its technology software and platform portfolio.
This move would be one of KKR’s biggest forays into the Australian market to date and would add to its growing list of technology businesses in the Asia-Pacific region, where it already owns ten companies.
KKR’s buyout funds in Asia are a key part of its performance strategy for this part of the world. Its third buyout fund raised a total of $9.3bn last year, which is a record for the region.
MYOB confirmed that it is looking at KKR’s offer, which its board termed as “non-binding.” The offer is conditional on KKR being able to raise funding for the deal and receive a unanimous go-ahead from its target directors.
A KKR spokeswoman confirmed the company’s offer for the remaining 80.1% of MYOB, which is valued at A$3.7 a share. This is 24% above MYOB’s market value when it closed at the end of trading yesterday and represents a markup worth A$2.18bn.
While looking to build its stake in MYOB, KKR opted to purchase 17% of the company from a Bain Capital affiliate, which was its biggest shareholder at the time. This left Bain Capital with a 6.1% of MYOB in a deal that cost KKR A$327m.
Shares of MYOB rocketed upon KRR’s recent announcement, bumping up to A$3.6 a share, its highest figure in nine months. However, since MYOB shares did not rise above what KRR’s full takeover would value each share, investors are confident that no further counteroffer from a rival company is in the works.
JPMorgan analysts said that this is partially due to the fact that KKR already has a significant enough stake to put off any late entrants to the acquisition of MYOB, calling this “a blocking stake in the company.”
MYOB did not respond as to whether Bain Capital endorsed the nature of the takeover, despite it still having some stake in the company at this point. Bain Capital privately owned MYOB between 2011 and 2015 before publicly listing it on the stock exchange.
Analysts pointed out that MYOB has suffered from a lack of diversification. It was once the dominant market force in providing accounting platforms and software to SMEs, but some of its market share has since slipped to Xero Ltd, which capitalized on cloud technology to become a bigger player in the market.
Xero and MYOB control over 80% of the local market, but according to reports, Xero is on a much higher plane of growth compared to its rival. Its market value is three times higher than that of MYOB at A$6.88bn.
JPMorgan analysts said that Intuit and Sage, who tried to buy MYOB back in 2011, will not be sufficient competition for buying MYOB. They added that KKR’s controlling stake is enough to prevent any 11th-hour deals.