Tyro Payments (ASX: TYR) has confirmed it is continuing to engage in preliminary discussions with several parties that have expressed interest in acquiring the company.
Private equity firm Potentia made a preliminary $1.27 offer in September, backed by HarbourVest Partners, which was rejected. Westpac and possibly other major banks are believed to also be interested in acquiring the payments technology business.
Tyro’s largest shareholder is Mike Cannon-Brookes’ Grok Ventures which holds 12.5%.
Tyro was the target of a short-selling attack almost two years ago which followed an outage to its payments system.
But chairman David Thodey told the company’s annual general meeting in Sydney on 24 November that the company was now in good shape and the board would only recommend an acquisition proposal it believed represented compelling value for all shareholders.
The former Telstra (ASX: TLS) chief executive said: “Over the past 12 months, as bond yields and interest rates started to increase, many investors have changed their focus from revenue growth to a free cash flow valuation perspective. This shift in valuation dynamics has had significant impact on Tyro’s share price which started financial year 2022 at $3.76 a share and finished the year at 60 cents a share. The board was acutely aware that 60 cents did not reflect the fundamental value of our business and we undertook a significant amount of work to determine the intrinsic value of the business, taking into account our attractive growth prospects as we continue to take share in the Australian payments and business baking markets, our expectations to achieve strong and improving operating leverage in the near term and that we are well funded and capitalised to support our growth ambitions.
“The results we have achieved in the first four months of financial year 2023 and our financial year 2023 guidance are a clear indication that Tyro is now on a path to profitability and free cash flow in the near term.”
Thodey said Tyro now operated on a much larger scale compared to when the company listed in December 2019. Annual transaction value had almost doubled from $17.5 billion in financial year 2019 to $34.2 billion in financial year 2022. This meant that the business had achieved an annualised constant growth rate of 25% over the three years despite the significant disruption of COVID on the business for most of that time.
Thodey is to resign from the Tyro board in March and will be succeeded as chairman by Fiona Pak-Poy, former investment director of Sydney venture firm Innovation Capital.
Jonathan Davey who was promoted to chief executive of TYRO two months ago, said the company had embarked on a program to reduce its operating cost base by $5 million which equated to a delivering an annualised $11 million saving.
Tyro’s shares closed at $1.71 on 28 November.
Image: Tyro’s payment devices are widely used in the retail sector.