KKR-backed software company Alludo has gained exclusive due diligence from ASX-listed Nitro (ASX: NTO) after making a $2-a-share cash offer for the company, eclipsing a $1.80-a-share increased offer from Sydney private equity firm Potentia Capital.
The Canadian company’s bid values Nitro at $490 million.
Nitro’s share price jumped 29% from $1.60 to $2.07 on news of the Alludo offer.
In a 31 October announcement, Nitro said Alluda was proposing to acquire 100% of the company by way of a scheme of arrangement. Alluda 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.
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 Allura to gain control of the company with a 50.1% or greater stake, that stance could be expected to change.
Nitro said Alludo had already carried out significant financial and other valuation-critical due diligence and the remaining work was expected to be confirmatory. It had granted 21 days of exclusive due diligence subject to customary fiduciary carve-outs.
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.
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.
Nitro said that after taking external advice its board had decided the Potentia bid undervalued the company and had unanimously agreed to reject it.
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%.
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.