Canadian software company Alludo, an investee of global private equity firm KKR, appears well placed to acquire Melbourne-founded Nitro (ASX: NTO), although no announcement has been made since the suitor’s period of exclusive due diligence expired on 21 November.
Alludo’s $2-a-share offer values Nitro at $490 million.
Nitro’s share price jumped 29% from $1.60 to $2.07 when the company announced the offer on 31 October. The share price has remained around the same level since suggesting the market expects a firm deal to be agreed at a slightly higher price.
In its 31 October announcement, Nitro said Alludo was proposing to acquire 100% of the company through a $2-a-share offer by way of a scheme of arrangement. Alludo had also indicated that it was willing to proceed with an off-market takeover bid, with a 50.1% minimum acceptance condition, also at $2 a share. The two processes would be carried out simultaneously. The off-market takeover would become effective if the scheme bid was unsuccessful.
Nitro said then that Alludo had already carried out significant financial and other valuation-critical due diligence and the remaining work was expected to be confirmatory.
Subject to Nitro and Alludo reaching agreement on an implementation deed, members of Nitro’s board unanimously intended to recommend shareholders to accept Alludo’s offer, in the absence of a superior proposal and subject to independent expert opinion.
The Alludo offer eclipsed a $1.80-a-share increased offer from Sydney private equity firm Potentia Capital.
Potentia holds a 19.8% stake in Nitro, making it the company’s largest shareholder, and had earlier said it did not intend to sell that stake into a rival bid. Were Alludo to gain control of the company with a 50.1% or greater stake, that stance could be expected to change.
On 18 November, Nitro reported that it had received a new approach from Potentia in which the Sydney firm had suggested that access to due diligence might enable it to meet or exceed the Alludo’s $2-per-share cash offer. Potentia was also willing to vary its offer by offering scrip to Nitro shareholders.
Nitro said that after taking advice from external financial and legal advisers it had concluded that it was unlikely the revised Potentia offer would become a superior offer. Also, re-opening negotiations would mean a deal would remain subject to the uncertainties of due diligence to the satisfaction of Potentia.
Nitro noted that it had offered due diligence to Potentia in October “alongside interested third parties like Alludo. However, Potentia declined to sign up to a non-disclosure agreement which contained customary terms that were agreed to by other interested third parties”.
Alludo has indicated that funding for its offer will be primarily from “equity sources” and will be fully committed prior to signing an implementation deed. No details of the equity source were provided but it is believed to be KKR.
According to Nitro, Toronto-based Alludo’s graphics software for remote workforces is complementary to Nitro’s products. Alludo’s software includes Parallels, CorelDRAW, MindManager and WinZip.
Nitro provides PDF software, document management and electronic signatures technology via a SaaS sales model.
Alludo, which recently re-branded from Corel, was acquired by KKR reportedly for around $US1 billion ($1.6 billion) in 2019. In June this year Corel acquired remote access technology company Awingu.
Founded in Melbourne in 2005, Nitro is now based in San Francisco. Nitro has also built up its global market presence with acquisitions. Initially focused on its alternative PDF technology, the company has more recently targeted becoming the global number three company in online signing technology.
Melbourne firm Starfish Ventures was an early investor in Nitro. US firm Battery Ventures also invested in the business prior to its listing and retains a 6.7% stake. Founder and chief executive Sam Chandler holds a direct stake of 1.56% plus other indirect holdings.
Australian Ethical Investment holds a 7.29% stake, Spheria Asset Management holds 6.21%, Thorney Technologies (ASX: TEK) holds 5.09%
Nitro went through an IPO and listed on the ASX in December 2019. Shares were issued in the IPO at $1.72.