MYOB Group forwarded the letter by Kohlberg Kravis Roberts & Co. L.P. (KKR) in which the bidder reaffirmed the cash consideration of $3.40 per share as its best and final offer to acquire all the shares in MYOB Group under a Scheme Implementation Agreement.
The letter was sent via KKR’s BidCo ‘ETA Australia Holdings III Pty Ltd’ to MYOB Group Limited (ASX: MYO) after market close on 19 March 2019, stated for public release. It can be seen that this letter comes almost a week later than MYOB’s largest shareholder Manikay Partners questioned the KKR proposal for exploiting the value of the company at a $3.40/share offer.
Manikay, led by former Australian Securities Exchange director Shane Finemore, asked MYOB Group to reconsider its decision of accepting KKR acquisition proposal, based on the foundation of its strong belief that KKR deal ‘significantly undervalues the company’. The Hedge Fund Manikay stated that MYOB and its management have the potential to deliver strong growth and result in substantial value to its shareholders over the long haul. As a result, Manikay valued MYOB at $4.00 and beyond per share.
But MYOB refused to work on Manikay’s recommendation and relied on Independent’s Expert Report which concluded that the offer proposed by KKR is in the best interest of MYOB shareholders. The offer price of $3.40 implies an equity value of approximately $2.0 billion and an enterprise value of approximately $2.4 billion.
Following the completion of review by Australian Securities and Investment Commission (ASIC), an autonomous body of the government, MYOB reportedly dispatched the Scheme Booklet to its shareholders along with personalised proxy forms.
Under the Scheme Booklet, the company addressed the funding concerns, stating that KKR BidCo has sourced sufficient funding to meet its funding obligation under, or in connection with, the Scheme. KKR BidCo intends to fund the Scheme Consideration through both equity and debt funding, including the equity commitment of up to $945 million from KKR Asian Fund III LP and up to approximately $1,215 million of committed debt financing.
The company further explained that if the Scheme goes through, all its Scheme Shareholders will be entitled to receive consideration of $3.40 in cash in respect of each MYOB share they hold at the Scheme Record Date of 2 May 2019. MYOB has scheduled to settle the payment of Scheme Consideration by 8 May 2019. Further, it has been understood that the offer price of $3.40 per share reflects the 14.1% premium to MYOB’s closing share price of $2.98 on 5 October 2018 and assumes no full year 2018 dividend is paid.
MYO traded flat on 20 March 2019; however, there has been a daily volume change of 9,547,004 shares. The stock last traded at $3.340 with a price to earnings multiple of 30.900x and a market capitalisation of $1.97 billion.
Over the past 12 months, MYO witnessed a positive momentum of 6.03% overriding the dip of 2.05% in the past month.
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