With a headline value of just under $2.2b, investors awoke to news on Monday morning that accounting software provider MYOB Group Limited (MYO.ASX) had yet again attracted the interests of a private equity group; KKR & Co had submitted an initial non-binding proposal at $3.70 per share having lightened Bain of 17.6% of the register. This marks the second time this decade MYO has been the subject of corporate activity, Bain emerging winner back in 2011 over both private equity and corporate interests in KKR & Co, Hellman and Friedman, and Sage Group.
With no offence to anyone at KKR or the rest of the PE industry, we remain cautious, even sceptical of non-binding, indicative private equity offers, or the private equity put’ as we call it. Similar to our commentary last year on the private equity interest in Fairfax Media (here), or our most recent commentary on Universal Coal (here), we remain advocates that a successful merger arb strategy is one that treats non-binding proposals with due caution – the recent failed BWX transaction is a great example of what can go wrong with non-binding private equity proposals. A non-binding approach is highly favourable to the private equity bidder and less so existing shareholders.