Manikay, which has over $2 billion of assets, said in its initial letter to the MYOB board on March 4 that it first bought shares in MYOB over a year ago, in January 2018. Shares in MYOB traded between $3.40 and $3.70 that month.
The fund has since upped its stake in MYOB to just under 10 per cent and now wants the board to reverse its decision to accept the bid.
Manikay’s first letter said KKR “took advantage of the temporary adverse market conditions in late 2018 to pressure the board” into accepting a lower bid.
That letter was released to the ASX and prompted an immediate response from MYOB, which stated that the independent expert’s report would reflect the material movements in market conditions.
MYOB said last week the corporate regulator was currently reviewing the the independent expert’s report and scheme booklet, and “subject to the satisfactory completion of that review” will be sent to shareholders. A shareholder vote is scheduled for April 17.
Manikay’s latest missive said that while the board recommended the takeover subject to an independent expert’s report, concluding it was in the best interest of shareholders, it “does not mean that the director’s fiduciary and statutory obligations do not require them to change their recommendation where new information becomes available before the receipt of an independent expert’s report”.
The letter referred to a 2003 takeover of National Can Industries to claim that “the duty to change a recommendation where new information has become available is even more relevant where the recommendation preceded the independent expert’s report”.
Manikay also referred to a Takeovers Panel guidance note to claim that the recommendation “no longer has sound or reasonable basis given there is sufficient evidence to support the conclusion that the KKR proposal does not reflect the true value of the company”.
The fund has asked the company to release the draft scheme booklet and independent expert’s report so that it can “further consider the merits of the KKR proposal” ahead of the court hearing to convene the shareholders meeting in April.
MYOB has had a long and controversial association with private equity.
The company was acquired by private equity firm Bain Capital in 2011 from another firm, Archer Capital, and listed on the ASX in 2015. Bain retained a large holding in the company once it floated and its subsequent sell-down was the source of significant trading speculation.
Manikay’s stoush with the board of MYOB has remarkable similarities to a situation playing out on Spain’s stock market.
On December 21 last year, just one day before KKR revised its bid for MYOB, the hedge fund giant launched a €431.7 million bid for Telepizza in Spain.
The KKR bid prompted Australian fund Perpetual, which had been acquiring shares in the company, to write to the Telepizza board urging it to reject what fund manager Garry Laurence described as a “cheeky bid for the company at €6 per share in December, during a major fall in global equity markets”.
Mr Laurence told The Australian Financial Review he had managed to secure the support of other shareholders in Telepizza to the point where they effectively had a blocking stake.
Telepizza had also been previously owned by private equity before listing on the stock market in 2016 at €7.75 per share.
Mr Laurence said “private equity is taking advantage of capital markets”.
“They list these businesses at high multiples, and when the stock market panics they will buy them back.”
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