Tyro Payments and Westpac get cold feet at the altar; Tyro shares sink on breakup

For a short while, it looked like things between Cannon-Brookes backed Tyro Payments (ASX:TYR) and Westpac (ASX:WBC) might work out. 

Westpac has the scale to bring Tyro into its operations without too much fuss, and Tyro, with a market cap significantly less than that of Westpac’s, was clearly poised to be the big winner. 

Tyro on Monday also confirmed it had received another takeover offer in a Revised Indicative Proposal (RIP) from an unlisted company called Potentia Capital Management. Tyro, however, says it’s not being respected and firmly believes it knows its own worth. 

The company today told shareholders “the board has determined to cease all discussions as [they] have not resulted in a proposal the board believes fairly values Tyro.” 

That unfair value conclusion is more directed at Potentia than it is Westpac. Announcements from the latter are vague and brief, and the decision appears to have been Westpac’s to break up, not Tyro’s.

The payments tech provider did, however, note its still open to mingling; should someone else come forward with a better offer than Potentia. 

Regardless, Tyro shares were down -17% on Monday in the second hour of trade. 

Potentia the right fit, wrong time 

The Cannon-Brookes Head Trust, called Grok, holds a 12.5% interest in Tyro, and Potentia got approval from Grok in September to go ahead with an acquisition of Tyro, as long as the price was above $1.27 per share. 

Tyro today notes that deal has now changes, outlining it was told by Potentia that “Grok cannot take any action under a competing proposal, unless that competing proposal has a value of $1.85 per share or greater.” 

It is unclear if this arrangement in any way impacted Westpac’s decision making process. 

A voting and acceptance deed between Potentia and Grok remains in place until as late as June 2023; should it be extended as permitted in early March; Potentia’s RIP also stopped Tyro from issuing a dividend. 

Tyro management also noted Potentia’s offer comes during the same window where tech stocks are being hammered and global weakness continues to impact valuations. 

“Tryo’s share price [has been] trading as high as $2.92 within the past 12 months,” the company said. 

What does Westpac say? 

Not a whole lot, really. The exact reasons for why Westpac has dropped the acquisition remain fairly unclear. 

“On 18 October Westpac announced it was in preliminary discussions with Tyro to acquire 100% of the company’s share capital,” the bank said. 

“Westpac has now undertaken due diligence and has decided that submitting an offer is not in the best interests of Westpac shareholders at this time.” 

Macquarie noted last month the banks in general appear set to generally do pretty well throughout FY23.

The shape of Tyro's three month charts