U.S. private equity giant KKR & Co has slashed a A$1.8 billion buyout proposal for MYOB, a sign of the souring appeal of high-tech investments and sending the target's shares down.
Seven weeks after KKR upped its indicative bid for the struggling Australian company to access its financial records, it wiped 10 per cent from the price it had suggested paying, MYOB has said in a statement.
MYOB said it would reject an offer at the new suggested price of A$3.40 per share, from A$3.77 on 2 November. KKR first approached the company in October with a proposal to buy the 80 per cent it did not already own for A$3.70.
Since then, shares of global technology players like Facebook and Google owner Alphabet have fallen sharply amid concerns about incursions on privacy, sparking a sell-down across the broader sector.
The Australian sharemarket has meanwhile tumbled 10 per cent as a result of U.S.-China trade tensions.
And credit markets have raised the price of corporate debt amid expectations of a rate hike, making it more expensive for firms like KKR to carry out leveraged buyouts.
On Thursday MYOB shares were down 11 per cent by midsession, just above the level they last traded at before KKR made its initial approach, while the broader market was down 0.2 per cent.
"It might be opportunism based on that move down in tech shares," CMC Markets chief strategist Michael McCarthy said. "The reality is, when you make a takeover bid you see a lot of value above and beyond the price you bid at."
A KKR spokeswoman declined to comment, while a MYOB spokesman declined to comment further than the market filing announcing the lower offer.
MYOB would be one of KKR's biggest acquisitions in Australia and add to its 10-strong stable of technology businesses in the Asia-Pacific region.
Although MYOB was once the dominant provider of accounting software to small and medium-sized businesses in Australia, in recent years it has struggled to compete for market share with cloud-based New Zealand rival Xero.
Xero has a market value three times the size of MYOB's and offices in London, San Francisco and Denver, while MYOB operates only in Australia and New Zealand.
(Reporting by Byon Kaye in Sydney and Aby Jose Koilparambil in Bengaluru; Editing by Stephen Coates)