US private equity firm KKR & Co has launched a conditional $1.75 billion takeover offer for MYOB after buying a 19.9 per cent stake.
KKR, which bought 17 per cent of MYOB from its biggest shareholder, made a $3.70 per share cash offer for the remaining 80.1 percent of the company. The price represents a 24 per cent premium to MYOB's last closing share price and values it at $2.18 billion.
MYOB shares soared by over a fifth to A$3.6 after the announcement, their highest intraday level in almost nine months.
"With 19.9 per cent of the register, KKR effectively own a blocking stake in the company. We think this could be enough of a deterrent for a potential interloper," JPMorgan analysts said in a note.
The announcement revealed KKR had purchased 17 per cent of the company's shares from an affiliate of Bain Capital, which acquired the then privately owned MYOB in 2011 and listed it in 2015.
Bain retains a 6.1 per cent stake in the administrative software company, the statement said.
The statement did not specify if Bain was endorsing KKR's takeover offer and a spokesman for Bain was not immediately available to comment.
Once the dominant provider of accounting software to small and medium-sized businesses in Australia, MYOB has in recent years struggled to compete for market share with global cloud and administrative software company Xero.
Together they service over 80 per cent of the market, according to Wilsons Equity Research, although the research also shows Xero's growth in Australia has outpaced MYOB's. Xero's market value, at around $6.88 billion, is more than thrice MYOB's.
KKR's non-binding offer is conditional on due diligence, obtaining financing for the deal and the full endorsement from MYOB's board of directors.
"The MYOB board has commenced an assessment of the proposal and will keep the market informed," it said in the statement.
JPMorgan analysts said that at this stage, it was unlikely that strategic investors such as Sage Group, which had attempted to buy the company back in 2011, and American peer Intuit, maker of popular software QuickBooks, would rival KKR's bid.
An Australian-based spokeswoman for Intuit said it did not comment on market speculation. Spokespeople for Sage did not immediately return an email seeking comment outside of office hours.
KKR's proposal follows its 2017 acquisition of Australian non-bank lender Pepper Group for about $682 million.
(Reporting by Paulina Duran; Additional reporting by Devika Syamnath in Bengaluru; Editing by Marguerita Choy and Muralikumar Anantharaman)