Nitro Software Ltd (NTO:ASX)

Last update - 18 November 2022 By Rivkin

Nitro Software Limited is a global document productivity software company. The Company offers integrated PDF productivity, eSignature and business intelligence (BI) tools through a horizontal, SaaS and desktop-based software suite. Nitro Software serves customers worldwide.

Latest Recommendation: 18 November 2022, 12:00pm

We discussed NTO recently as a potential Event opportunity and a lot of action has occurred since then. We now have two interested parties, with one binding offer at $2.00 per share and original bidder Potentia apparently willing to pay more if it receives access to due diligence materials. It is unclear whether NTO can provide that access with the deal it has with Alludo, so we only have an appetite to buy NTO at or slightly above the binding $2.00 offer. NTO is trading at $2.10 this morning, so we will remain disciplined for the time being and wait for a better entry price.

Update: 31 October 2022, 11:00am

Further to Friday’s update on NTO, the situation has become more interesting this morning as NTO has announced that it has an indicative and non-binding offer from the KKR-backed Alludo at $2.00 per share, with a scheme of arrangement and concurrent takeover bid with 50.1% acceptance conditions (designed to negate Potentia Capital’s blocking stake). Alludo has already conducted some due diligence, so entering binding documentation remains subject to documentation and some remaining confirmatory due diligence.

Until we have a binding offer on the table, we will continue to remain on the sidelines, but we are getting closer and closer to an investment opportunity in NTO.


Update: 28 October 2022, 12:45pm

NTO is another beaten-down software company that has recently attracted takeover interest from private equity, with Potentia Capital Management having proposed an indicative and non-binding offer of $1.58 per share after acquiring a 19.8% stake in the company. Given the opportunistic timing of the offer, we weren’t surprised to see the NTO board reject the offer but have been waiting to see the next shoe drop. Considering Potentia already spent roughly $80m to build its stake, it was unlikely that it was going to end with one lowball offer. Still, Potentia have been in a difficult spot as it has been unable to conduct due diligence on NTO while the board remained resistant to the approach.

As of this morning, the situation has become more interesting as Potentia has launched a binding takeover offer for $1.80 per share (an increase of 14% to its first proposal). Additionally, it has stated that its offer is final in the absence of any access to due diligence (which may encourage Potentia to increase its offer if it likes what it sees under the hood) and any competing bids and that it will vote its 19.8% stake against any competing bid if one were to emerge. The offer, therefore, comes without any requirement for due diligence which is unusual for private equity and demonstrates its enthusiasm.

NTO currently remains in a trading halt while the board formulates a response. While the offer is binding, one key condition is that the board supports the offer. So, while the offer is theoretically binding, if the board rejects the offer as insufficient, then it is as good as a non-binding offer which would leave us on the sidelines. So, while our expectation is that there is a good chance we will get a bite at NTO, with the events of today we cannot do so until the board recommends the offer. We will update members further once the NTO board responds.

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