Sage confirms bid for Australian rival

HONG KONG/LONDON Tue Aug 16, 2011 3:48pm EDT

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HONG KONG/LONDON (Reuters) - British business software group Sage (SGE.L) has confirmed it is considering buying Australian peer MYOB Ltd, after sources familiar with the matter told Reuters it had submitted a bid.

The deal, which could value MYOB at more than $1 billion, would be Sage's biggest to date and would mark a resumption of the acquisition strategy that has driven the group's international growth during the last decade.

"Sage can confirm that it is currently considering a potential acquisition of MYOB," the company said on Tuesday.

MYOB, an abbreviation of the phrase 'Mind Your Own Business', is being sold by private equity firms Archer Capital and HarbourVest Partners LLC, which bought it for about A$450 million in 2008. The firms had hired UBS AG (UBSN.VX) to advise on the sale, sources have said previously.

Bain Capital and Kohlberg Kravis Roberts & Co (KKR.N) had also put in bids for the asset, two sources told Reuters on Monday.

The size of the bids was not known.

Sage, which has a market value of $5.5 billion, supplies business management software to small and medium-sized enterprises.

Sage has grown through acquisitions, typically moving into new markets by buying a local provider of software, and now has more than 6 million customers in more than 50 countries.

The group, based in Newcastle, north-east England, has not struck any major deals in the last three years, choosing instead to pay down debt, but Chief Executive Guy Berruyer said in May that M&A was still part of its strategy.

Shares of Sage pared losses after the company confirmed its interest. They closed down 1.1 percent at 252 pence, underperforming the London market .FTSE and the European technology index .SX8P.

Analyst Rajeev Bahl at Matrix said MYOB's customer base would be a very good fit for Sage.

"It's a sensible deal if done at the right price," he said.

Execution Noble analyst Vijay Anand agreed that the rationale in buying the leading accountancy software company in Australia was good as long as Sage did not overpay.

"Funding is not a big concern," he said. "The question mark is over multiples and what synergies they can extract."

MYOB generates a core profit of about A$100 million, two sources previously told Reuters.

Similar deals in the sector, such as Kohlberg Kravis Roberts & Co buying a majority stake in September 2010 in Norway's Visma, a company Sage had tried to buy in 2006, have been struck at an enterprise value of around 13 times core profit.

Applying that multiple to MYOB would result in a price tag of about A$1.3 billion ($1.4 billion).

Bids were placed on Thursday last week.

UBS declined comment. Archer and HarbourVest were not immediately available for comment.

(Reporting by Stephen Aldred and Paul Sandle; Editing by Chris Lewis, Will Waterman and Bernard Orr)

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