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MYOB update: Why shareholders aren’t happy with the ASX company’s board

Takeover agreement

The MYOB Group Ltd (ASX: MYO) share price rose 1.2% on the ASX yesterday after a Scheme Update for its proposed acquisition by global private equity firm KKR – one which saw its second-largest shareholder give the MYOB board a piece of its mind.

What was in the Scheme Update?

MYOB’s second largest shareholder, US-based hedge fund Manikay Partners, provided a letter to MYOB’s Board of Directors in which it finally conceded to the proposed KKR acquisition – but not without a parting shot at those in charge of the software group.

Manikay Partners holds a 16% stake in MYOB and has been vehemently opposed to the $3.40 takeover bid which has been endorsed by the Board despite concerns that it may be undervaluing the group’s fair value.

The investor group said that it “intends to vote all the MYOB shares that we own or control FOR the upcoming Scheme, subject to there being no proposal that we consider to be superior prior to the vote.”

Manikay also said it remains “very disappointed that, despite our repeated efforts to convince you otherwise, you failed to change your recommendation in light of the material improvement in market conditions since the announcement of the Scheme, among other factors”.

The MYOB share price is currently trading at $3.38 per share having surged 14.6% in one day on 24 December 2018 on news of the acquisition.

KKR had initially offered $3.70 per share for MYOB in October 2018, then increased to $3.77 per share which caused the MYOB Board to allow the private equity firm to conduct its due diligence on the software firm.

However, the Q4 2018 global equities market crash scuppered those plans and saw KKR revise its offer to $3.40 per share – with the crux of Manikay’s argument being that markets have since recovered and it should be back towards the higher initial price.

Should you buy MYOB’s shares?

I’m not in the game of betting on M&A activity, and I think the ship has sailed on MYOB from a short-term value play.

The software company’s profitability has been under pressure for some time as it has faced competition from the likes of Xero Ltd (ASX: XRO) which has seen its share price surge 21% higher this year.

For those Fools looking for something a little more niche, I’d suggest checking out this buy-rated stock that could be set to take a new-age $22 billion industry by storm.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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