Target changes recommendation on bid

An improved offer from Potentia Capital has persuaded software company Nitro (ASX: NTO) to switch its recommendation to shareholders in favour of the technology specialist private equity firm.

Sydney-based Potentia is being backed in its bid by HarbourVest Partners, Aware Super and San Francisco-based L Capital.

Potentia increased its cash offer by 17 cents to $2.17 cents a share on 23 February and committed to further increase that price to $2.20 if, by the end of March, it obtains a relevant interest in at least 75% of the company’s shares and $2.25 if in that period at least 25% of Nitro’s shares are voted in favour of its offer.

Prior to making its initial bid for the company, Potential had acquired a relevant interest in 19.31% of Nitro. By 6 March, that had increased to 38.36%.

At $2.25 a share, Nitro would be valued at $551.89 million.

All Nitro shareholders who accept the offer will receive any subsequent uplift in the offer price, provided the Potentia offer is declared unconditional.

Potentia declared its offer “best and final” not to be increased in the absence of a superior proposal.  

The Nitro board had previously been in favour of an offer by KKR-backed Canadian company Alludo.  

Nitro said on 23 February that it had determined the improved Potentia offer was superior to Alludo’s $2.15 per share cash offer which had earlier been declared “best and final” meaning it could not legally be increased.

In a 6 March announcement, Nitro said the Alludo offer had lapsed and its board recommended shareholders to accept the Potentia offer in the absence of a superior proposal.

Founded in Melbourne in 2005, Nitro is now based in San Francisco. The company has built up its global market presence with acquisitions. Initially focused on its alternative PDF technology, the company has more recently targeted becoming one of the top three companies globally 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, according to Nitro’s last annual report, retained a 6.7% stake. Founder and chief executive Sam Chandler holds a direct stake of 1.56% plus other indirect holdings.

Also, according to Nitro’s last annual report, Australian Ethical Investment held a 7.29% stake, Spheria Asset Management held 6.21%, and Thorney Technologies (ASX: TEK) held 5.09%.

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

Potentia made the first offer for Nitro in August, offering $1.58 a share. The company quickly rejected that offer.