Intervention sought on $526m deal

Technology specialist private equity firm Potentia Capital has applied to the Takeovers Panel to order software company Nitro (ASX: NTO) to provide it with due diligence access.

In August, Potentia, with the backing of global private capital investment firm HarbourVest, offered $1.58 a share for Nitro, which the company quickly rejected.

On 28 October, Potentia announced a $1.80-a-share off-market takeover bid for Nitro.

Potentia holds a 19.8% stake in Nitro, making it the company’s largest shareholder.

On 31 October, Nitro announced to the ASX that its board had unanimously rejected Potentia’s offer and had entered into a process deed with Canada-based Alludo after receiving a non-binding proposal from Alludo to acquire 100% of Nitro by way of a scheme of arrangement at $2 cash per share or, alternatively, via an off-market takeover bid, with a 50.1% minimum acceptance condition, at $2 cash per share.

On 15 November, Nitro entered into an implementation deed with Alludo to give effect to Alludo’s offer.

On 8 December, Potentia increased its offer price to $2 per share and said access to due diligence might enable it to increase its cash offer beyond that price.

On 12 December, Nitro announced that Alludo had increased its offer to $2.15 cash per share − $526.89 million − and its board had unanimously rejected the revised Potentia offer.

On 23 December, Potentia adjusted its offer to include a scrip alternative and stated again that it would consider increasing the offer price if granted due diligence access.

On 28 December, Nitro confirmed that it did not consider the revised Potentia offer, including the scrip alternative, to be superior to the revised Alludo offer.

In a long list of submissions, Potentia argues that denying it due diligence access is contrary to the interests of Nitro shareholders.

Takeovers Panel chief executive Allan Bulman said that no decision had yet been made on whether the panel would look into Nitro’s decisions.

Alludo has indicated that funding for its offer will be primarily from “equity sources” and will be fully committed prior to signing an implementation deed. No details of the equity source were provided but it is believed to be KKR. 

According to Nitro, Toronto-based Alludo’s graphics software for remote workforces is complementary to Nitro’s products. Alludo’s software includes Parallels, CorelDRAW, MindManager and WinZip.

Nitro provides PDF software, document management and electronic signatures technology via a SaaS sales model.

Alludo, which recently re-branded from Corel, was acquired by KKR reportedly for around $US1 billion ($1.6 billion) in 2019. In June this year Corel acquired remote access technology company Awingu.

Founded in Melbourne in 2005, Nitro is now based in San Francisco. Nitro has also built up its global market presence with acquisitions. Initially focused on its alternative PDF technology, the company has more recently targeted becoming the global number three company in online signing technology.  

Melbourne firm Starfish Ventures was an early investor in Nitro. US firm Battery Ventures also invested in the business prior to its listing and retains a 6.7% stake. Founder and chief executive Sam Chandler holds a direct stake of 1.56% plus other indirect holdings.

Australian Ethical Investment holds a 7.29% stake, Spheria Asset Management holds 6.21%, Thorney Technologies (ASX: TEK) holds 5.09%

Nitro went through an IPO and listed on the ASX in December 2019. Shares were issued in the IPO at $1.72.