Shares in accounting software group MYOB Group surged yesterday after it told the ASX that private equity firm KKR & Co had offered to buy shares it does not already own in the cloud services provider for about $1.75 billion after grabbing a 17.6% stake in MYOB from major shareholder, Bain Capital Abacus Holdings, L.P.
KKR paid about $327.4 million, or $3.15 a share, for the stake from Bain to build up its hold in MYOB to 19.9% and Bain’s holding was cut to around 6.1%.
The proposed offer price of $3.70 cash a share for the stake yet to be owned represents a premium of 24% to MYOB’s last close on Friday.
MYOB said in a statement said its board has commenced an assessment of the proposal.
MYOB was once the dominant provider of accounting software to small and medium-sized businesses in Australia, but in recent years it has been overtaken by Kiwi group, Xero which earlier this year relocated its domicile to Australia. Xero is expanding rapidly not only in Australia but internationally – especially the US.
While the duo have over 80% of the accounting software market, data from Wilsons Equity Research, shows Xero is now growing much faster than MYOB.
Xero’s market value, at around $6.88 billion, is more than three times that of MYOB.
Xero shares are up more than 70% so far in 2018.
KKR’s non-binding offer is conditional on due diligence, obtaining financing for the deal and the full endorsement from MYOB’s board of directors.
That means there is a little way to go before the proposed offer hardens up or is dropped.
MYOB shares jumped 19% to end at $3.55, under the suggested offer price because investors don’t see a counter offer at the moment, and are doubtful the deal will happen – at this stage.
MYOB shares were last at the $3.55 level in mid-January so the $3.70 price is not a knockout. In fact, MYOB shares are still down 2% year to date against that 70% plus surge for Xero.
Xero shares were up around 07% to $48.84 in a nasty market slide of 1.4% or 85 points.
