MYOB at odds over deal for Reckon

SOFTWARE group MYOB has dumped a $180 million deal to acquire the Australian and New Zealand assets of Reckon’s Accountant Group after discovering new information about the company and its competitors.

Shares in both dived on the news, with MYOB falling 25 cents, or 8.2 per cent, to $2.81 and Reckon also down 8.2 per cent to $1.06.

MYOB and Reckon signed a six-month sale and purchase agreement in November, and the regulatory process has taken longer than anticipated. MYOB chief executive Tim Reed said it was within either party’s rights to ditch the deal if its perceived value had diminished, though he refused to say whether or not MYOB wanted to pay a reduced price.

“If you think about it, anything that changes in the market during that six-month period, the acquirer runs the risk if it’s negative and gets the upside if it’s positive,” Mr Reed told analysts yesterday.

“Once we hit that six months, then both parties can stand back and either party has the right to terminate if their perspective on the value that they will be deriving for their shareholders has changed from that period.”

The Australian Competition and Consumer Commission said in March it was concerned the deal would leave MYOB as the only supplier of practice software suitable for medium to large accounting firms.

Mr Reed said Reckon revealed in the regulatory approval process it did not see a path for its practice management software to be developed online, and competitors said they were not able to provide a full suite of online tools.

He said MYOB would focus on organic growth opportunities, and accelerate its share buyback.

It will fast track $50 million of research and development spending over the next two years to bring forward the delivery of MYOB’s online platform, and spend $30 million to boost sales and marketing, with the aim of having one million online subscribers by 2020.

The company has slightly lowered its forecast for full earnings margins as a result of the investments.

Mr Reed said use of online accounting was expected to double over the next eight years, taking 80 per cent of the market.

“The time is absolutely now to invest,” he said.