August 19, 2011 3:04 pm

Bain Capital outbids Sage for Australia’s MYOB

US private equity fund Bain has overtaken Sage in the race for its Australian rival MYOB, according to people familiar with the talks. Sage had been the preferred bidder until recently having put a valuation on MYOB of about A$1.3bn (US$1.4bn).

The private equity fund has come back to outbid Sage, however.

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One reason cited by some close to the process as a possible concern for Sage, was that because of a fall in Sage’s share price, the acquisition could be worth more than 25 per cent of its market value and require a shareholder vote. It was not clear that Sage, one of the UK’s largest software vendors, would get the required support from shareholders.

Another person close to the process, though, pointed to recent sales of similar companies in the sector where Sage has been outbid by private equity groups and said the deal could have been structured without the need for a vote.

Bain’s offer is about 12 to 13 times MYOB’s earnings before interest, tax, depreciation and amortisation last year.

People close to talks warned that negotiations were still ongoing with Sage and private equity funds Bain Capital and Kohlberg Kravis Roberts, which had also been in talks. All parties declined to comment.

Sage has shown caution in acquisitions having previously walked away from negotiations in 2010 for similar companies in the sector, Visma and TeamSystem.

“Shareholder value is of paramount importance to Sage and they have a close dialogue with their shareholders,” a person close to the situation said. A successful takeover would be the first big deal for Guy Berruyer, who took over as Sage chief executive last year, and would mark a resumption of the strategy that has been the driving force behind its growth.

An acquisition of MYOB would more than double Sage’s previous record deal in 2008 when it paid £315m for Emdeon, the US healthcare software group.

Slightly lower multiples have been paid by buy-out groups in the accounting software sector. Last year, Visma was sold for about 12.5 times earnings, while TeamSystem was bought for more than 11 times. Sage confirmed on Wednesday that it was considering an acquisition of MYOB but said there was no certainty it would proceed.

The talks are expected to conclude in coming days.

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