British business software company Sage Group Plc is the frontrunner to buy Australian peer MYOB Ltd, three sources familiar with the matter told Reuters on Wednesday, with one source saying the company has bid up to A$1.4 billion ($1.5 billion).
Sage shares were down as much as 2.5 percent in early trade outpacing a 0.7 percent fall in the benchmark London index.
Sage's A$1.3-1.4 billion bid gives a valuation of about 13 times EBITDA, and was at least 10 percent above bids from private equity firms Kohlberg Kravis Roberts & Co LP and Bain Capital, which also submitted final bids, two sources said.
An announcement could come soon, one of the sources said.
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 to advise on the sale, sources have said previously.
Sage, which has a market value of $5.5 billion, supplies business management software to small- and medium-sized enterprises. Its sales are split about one-third software to two-third support contracts.
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.
UBS analysts in a report on August 16 noted that other recent deals in the sector had been struck at enterprise values of more than 10 times EBITDA.
KKR acquired a 77 percent stake in Nordic accountancy software company Visma for 12.5 times EBITDA, and HG Capital acquired Italy's TeamSystem at 11.3 times EBITDA, beating Sage in the process, UBS said in the report. Both deals were in August 2010.
Sage on Tuesday said it was considering an acquisition of MYOB, confirming a Reuters report.
Archer and Sage declined comment. HarbourVest did not respond to requests for comment. UBS was not immediately available for comment.
Sources declined to be named because they were not authorized to talk to the media.
($1 = 0.953 Australian dollars)
(Editing by Jacqueline Wong)