A Westpac Tyro deal is being discussed, but shareholders don’t seem too eager

Nick Sundich Nick Sundich, October 18, 2022

There’s never a shortage of M&A rumours on the market, but a Westpac Tyro tie-up just might be on. The Big 4 bank has confirmed that it is in talks with Tyro, but a deal wasn’t yet closed. What’s in it for both shareholders?

 

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Westpac and Tyro are two of Australia’s five largest EFTPOS providers

The Big Four banks are Australia’s four biggest EFTPOS providers and then there’s Tyro Payments (ASX:TYR).

Since Tyro listed in 2019, the company’s transaction volumes have grown, but the share price has struggled due to volatile consumer spending, short-seller attacks, a terminal outage and consequential class action against the company as well as the departure of long-term CEO Robbie Cook.  

 

A Westpac Tyro deal is being discussed

Tyro has been rumoured as a takeover target because of its growing business. An M&A deal would give Tyro and its suitor greater synergies. After the AFR’s Street Talk column reported a Westpac Tyro deal was in talks, Westpac confirmed to investors this morning that preliminary takeover discussions were on. Westpac told investors that a deal would strengthen its small business proposition, especially in the hospitality and healthcare sectors.

 

westpac tyro

Tyro Payments (ASX:TYR) share price chart (Graph: TradingView)

 

So what’s next?

As this morning’s announcement noted, there is no certainty that a Westpac Tyro deal will proceed.

There are plenty of recent examples, such as Infomedia (ASX:IFM) and Appen (ASX:APX), that depict the reality that takeover talks don’t always lead to confirmed deals. Of course, if a deal proceeds it will allow Tyro shareholders a chance to exit. But if talks fail, shares may well fall. 

 

Tyro set for a solid FY23, but may not get credit for it

If the Westpac Tyro talks lead to nothing, what’s next for Tyro?

Consensus estimates forecast 22% revenue growth and 149% EBITDA growth for FY23 (to $399.1m and $26.6m respectively). In that respect you might say it has a bright future.

But, it is trading at a 29.9x EV/EBITDA multiple and there’s little indication that investors will change their behaviour and give it credit for solid financials considering they have hardly ever done so in the last three years.

Even after today’s news, the shares are hardly moving. So, it doesn’t seem like investors need to jump on this wagon for now.

 

 

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