A private equity consortium led by technology specialist Potentia Capital has dug in after having an initial offer for software company Nitro (ASX: NTO) quickly rejected.
Sydney firm Potentia is backed in the bid by global firm HarbourVest Partners.
Nitro announced on 31 August that it had rejected “an unsolicited, highly conditional and non-binding” $1.58-a-share proposal from the consortium received the previous day.
Nitro said the consortium had advised it that it had acquired a combined relevant and economic interest in more than 41.4 million shares representing 17% of the company.
It is believed the consortium continued to acquire Nitro shares and, as of 1 September, was likely to have reached close to the 19.99% limit allowed before it would be required to make a takeover bid.
Nitro said its board had carefully considered the offer, including taking external advice, and had concluded it significantly undervalued the company.
It said the indicative proposal:
was highly opportunistic and came at a time of significant share market volatility and cyclical weakness in global technology company valuations, as reflected in the company’s share price;
did not adequately compensate shareholders for Nitro’s position as one of only two software companies worldwide with a proven enterprise-grade SaaS PDF productivity and eSigning platform, and a uniquely powerful and differentiated solution offering in a fast-growing market worth $US28 billion and;
represented a 61% discount to Nitro’s 52-week trading high of $4 per share on 17 November 2021.
The company said its board remained committed to maximising shareholder value and was willing to engage with the consortium or other qualified third parties in relation to proposals that would more appropriately compensate shareholders and reflect the fundamental value of Nitro on a control basis.
Nitro has appointed UBS Securities Australia as its financial adviser and Allens as its legal adviser on the bid. It has also appointed Cadence Advisory as independent adviser to its board.
An initial substantial shareholder form was lodged with the ASX on 31 August on behalf of Potentia which said the firm and its associates currently held combined relevant interests and economic interests of 16.95% in shares in Nitro comprised of relevant interests of 12.097% and economic interests of 4.855%
The relevant interests of 12.097% arose from Nitro shares acquired on market. The economic interests of 4.855% arose under a cash-settled total return swap with Jarden.
The indicative offer lifted Nitro’s share price from $1.13 to $1.58.
US venture capital firm Battery Ventures held a 6.67% stake in Nitro and co-founder and chief executive Sam Chandler held a 1.56% stake as at 31 January.
Founded in Melbourne in 2005, Nitro is now based in San Francisco.
Nitro listed on the ASX in December 2019 with early investor Starfish Ventures reducing its holding from 21.3% to 13.8% and Battery Ventures reducing its stake from 18.2% to 13.2%. Both holdings were subject to voluntary escrow provisions restricting further selling until after Nitro had released its results for the year to 31 December 2020.
Shares were issues in the IPO at $1.72.
Image: Nitro chief executive Sam Chandler.