Online accounting software provider Xero has raised $23.2 million through a share placement, with the co-founder and former major shareholder of Australian rival MYOB, Craig Winkler, taking a large chunk.
Winkler has subscribed for $18 million of new Xero shares at 90 cents per share. Xero shares closed at $1.15 yesterday.
The Winkler deal includes $450,000 from parties associated with Winkler, including:
- the Bank of New Zealand, an existing Xero shareholder which will take up $1.6 million worth of new Xero shares;
- two Independent Directors of Xero, Trade Me founder Sam Morgan and Graham Shaw, who have subscribed (in aggregate) for $1.45 million worth of the new capital.
Xero chief executive Rod Drury said he was delighted to welcome Winkler as a strategic investor. MYOB was recently acquired by private equity investors and Winkler is no longer involved in MYOB as a director, executive, shareholder or any other capacity. Nonetheless, the investment from Winkler and his associated parties is subject to Xero shareholder approval, which is expected to be sought in May.
Xero, which sells Internet- based accounting software to small and medium-sized businesses, said other investors including an un-named institutional investor had taken up the remaining $2.15 million worth of new shares.
"The new capital will enable Xero to accelerate its growth plans in the UK, Australian and US markets," the company said.
Winkler's financial advisor will subscribe in cash for $450,000 of new shares in Xero at 90c per share, which will be held by Binalong Rural Pty Ltd and Mordes Howard Pty Ltd.
Craig Winkler, his financial advisor and the entities holding their respective investments, totaling $18 million, are all deemed to be associated parties.
"We are delighted to have secured a large amount of funding from strategic investors such as the BNZ and Craig Winkler," Drury said.
"Craig Winkler is very experienced in the market for the provision of accounting software and services to small businesses. His investment is a strong endorsement of the Xero business model, its market and growth opportunities."
Winkler and his associated parties have agreed to embargo arrangements with Xero under which they are not able to sell any of their shares for a period of 12 months from the date the shares are issued.
Drury and Hamish Edwards, the founders of Xero, have also separately entered into embargo arrangements with Xero under which each of them is restricted from selling any shares for 12 months.
Xero also intends to offer a share purchase plan to its existing shareholders at 90c per share.
Xero listed on the NZX in June 2007, raising $15 million at $1 per share.