Businessman Rod Drury, chief executive of Xero. Photo / Jason Oxenham.
Businessman Rod Drury, chief executive of Xero. Photo / Jason Oxenham.
The arrival of MYOB Group, the Australian accounting software firm, on the Australian Stock Exchange is unlikely to weigh on dual-listed rival Xero's share price, says an analyst.
The Melbourne-based firm has announced its initial public offer, as it looks to raise total proceeds of between A$831.7 million and A$833.8 million to pay down debt, which stood at A$435 million at December 31. Shares have an indicative price range of A$3 to A$4 apiece, which would give the company a total enterprise value of A$2.34 billion to A$2.69 billion.
Forsyth Barr research analyst Blair Galpin says the offer was long rumoured and was unlikely to weigh on rival Xero's share price.
"It's been well known and it's no surprise to the market that it is actually happening," Galpin said. "The real question that there will be is - how successful is the IPO?"
The majority owners of MYOB, Bain Capital, are not selling any shares but will reduce their stake to 57 per cent from 95 per cent through dilution after the issue of new shares. The private equity firm's shares will be held on escrow after the offer until it releases its 2015 annual results next February.
Unlike Wellington-based Xero, which is forgoing profits as it invests in growth with a focus on the US market, MYOB plans to pay a dividend within a year of being listed, with a payout ratio of between 60 per cent and 80 per cent.
In the year ending December, MYOB expects a pro forma annual net profit of A$45.4 million, which strips out one-off items, up from a pro forma historical result of A$28 million the previous year. Its statutory result for the year ending December forecasts a loss of A$43.9 million.
MYOB has been around for quite some time and had a complete product set so it's been selling products for quite some years. Xero is still building up new products and investing more and more in its core products and pipeline.
"MYOB is Australasian focused, so they're not spending to try and grow in the UK and US markets," said Galpin.
"MYOB has been around for quite some time and had a complete product set so it's been selling products for quite some years. Xero is still building up new products and investing more and more in its core products and pipeline."
NZX-listed shares in Xero closed down 50c yesterday at $23.60.
US-based institutional shareholders this year invested $147.2 million of extra capital in Xero, more than doubling the firm's cash on hand to about $180 million.
The solely cloud-based accounting software firm wants a million customers, and is targeting growth in the US market, where it seeks market share among an estimated 29 million owners of small-to-medium-sized businesses.
The extra cash might be used for a possible US IPO, as well as further acquisitions of smaller software-as-a-service businesses, chief executive Rod Drury said in February at the time of the announcement.
