Tyro shares take a massive hit as Potentia pulls out of takeover talks

Australian private equity group Potentia Capital Management has abandoned its interest in Sydney-based fintech Tyro Payments (ASX: TYR) after stalking the company for a potential takeover for the past eight months.

Potentia, which earlier this year was granted access to Tyro’s books after withdrawing a revised $875 million offer in December, has told the company it doesn’t plan to proceed with a takeover proposal.

“The board has been working with Potentia in good faith in the best interests of all Tyro shareholders over a period of many months to conclude a proposal,” Tyro says in a statement to the ASX this morning.

“Accordingly, discussions with Potentia in relation to a possible change of control proposal have now ceased.”

The news pushed Tyro shares down by as much as 20 per cent to $1.23 in early trade, although the share price recovered within minutes of the open to be equivalent to Potentia’s original offer of $1.27 a share in September.

Potentia sweetened the bid to $1.60 a share in December, valuing the company at $875 million, as it was also competing with Westpac Banking Corporation (ASX: WBC) which had been eyeing a potential buyout.

While Westpac officially withdrew its interest in Tyro last December, citing an offer for Tyro would not be in the best interests of shareholders at the time, Potentia progressed to due diligence in February after reigniting its interest in the group.

Tyro, which offers point-of-sale services to merchants, notes that Potentia has abandoned the takeover talks despite ‘extensive and advanced negotiation of material commercial terms and draft transaction documents’.

“Tyro facilitated engagement with regulators to understand the complexity and anticipated timeframes to complete a transaction relating to the proposed private equity ownership of an authorised deposit-taking institution,” the company says.

Tyro chair Fiona Pak-Poy says that while she is disappointed by Potentia’s decision, she notes  Tyro has been buoyed by recent milestone achievements, including the launch of contactless payment system on iPhone, that position the company for growth.

“The board and management team have worked with commitment and in good faith to facilitate a potential change of control transaction to be put to our shareholders for consideration,” Pak-Poy says.

“We have appreciated Potentia’s engagement and are disappointed that they were ultimately unable to deliver a revised offer.

“While these have been long and drawn-out discussions, the refreshed leadership team under Jon Davey has continued to deliver substantial operational achievements, including launching Tyro Pro, Tyro Go and Tyro BYO (Tap to Pay on iPhone). These performance outcomes have strengthened the financial and market position of Tyro as we deliver our clear strategic roadmap.”

 Davey was appointed as Tyro CEO in September last year following the departure of Robbie Cooke who left to take up the challenge of leading embattled casino operator The Star Entertainment Group (ASX: SGR).

Pak-Poy was appointed chair of Tyro Payments in March following the departure of former Telstra boss David Thodey after more than three years in the role.

“The board and management are confident and excited about the company’s outlook and the opportunities to deliver value for our customers and shareholders,” Pak-Poy says.

Last week, Tyro upgraded its FY23 earnings guidance with gross profit expected to land between $192 million to $194 million and EBITDA expected to range from $41 million to $43 million.