MYOB Group Limited (ASX: MYO) inked a Scheme Implementation Agreement with investment company Kohlberg Kravis Roberts & Co. L.P. Under the agreement, Kohlberg Kravis Roberts will purchase all of the shares in MYOB that it does not already own at a purchase consideration of $3.40 cash per MYOB share.
This revised all-cash consideration of $3.40 per share reflects an attractive FY18 EV/free cash flow multiple of circa 22x and FY18 EV/Cash EBITDA multiple of ~17x and. However, the scheme remains subject to the satisfaction of several conditions including shareholders as well as court approval.
As per the agreement, the acquisition will be undertaken through the scheme of arrangement which provides MYOB an option to solicit competing proposals until 22 February 2019. This outlines a ‘go-shop’ provisions under which KKR has committed to vote in favor of, or sell its shareholding into, any superior qualifying offer.
Currently, MYOB Directors have placed unanimous recommendation in favor of KKR’s revised proposal and have asked its shareholders to vote ‘for’ the transaction in the absence of a Superior Proposal.
MYOB Chairman Justin Milne stated that looking to the uncertainty in the current market conditions, the revised proposal of KKR is deemed to be in the best interest of MYOB shareholders. Mr. Milne added that this proposal also accelerates the company’s long-term strategic growth plan along with giving it a substantial time to test the revised proposal over the implementation period.
As per the company’s information, MYOB shareholders will receive a Scheme Booklet in mid-March 2019 and are expected to vote on the Scheme at a meeting scheduled for 16 April 2019. If all the requisite conditions are duly satisfied, the Scheme is supposed to be implemented on 3 May 2019. However, till the implementation period, MYOB Group intends to go through fair and full testing of revised proposal placed by KKR.
In addition, the SIA contains certain exclusivity terms starting from 22 February 2019 including, no talk restrictions, a matching right and no shop restrictions. The SIA also explained the certain situations under which a break fee may be payable to KKR.
On Financial Performance front, the company expects its FY18 earnings to reflect organic revenue growth of approximately 7%, research & development spend of approximately 19% of revenue, and free cash flow above $100 million. Further, the underlying EBITDA margin is expected to lie within 42% and 43%. MYOB stated an update on the company’s performance would be provided at its FY18 results presentation slated to be held on 21 February 2019, before undertaking the Scheme Meeting scheduled for 16 April 2019.
MYOB shares continues to show upside movement, as its stock surged 1.368% to trade at $3.335 on 27 December 2018. Whereas, on the day of announcement, MYOB shares jumped up by 14.634% to last trade at $3.290 on 24 December 2018. In the past 12 months, MYO stock has fallen 23.47% including a plunge of 16.33%.
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