A NORTH-EAST software giant has been hit with a multi-million pounds damages claim over its decision to abort takeover talks with an Australian group.

In August it emerged that FTSE 100 company Sage had entered into exclusive talks to buy MYOB from buyout groups Archer Capital and HarbourVest Partners after it outbid rival offers. However, the deal was thought to have been derailed by market turmoil.

The buyout group is now suing Sage for about £83m for walking away from the proposed deal.

Melbourne-based MYOB, short for 'Mind Your Own Business', was eventually sold to Bain Capital for about £800m, some £63m less than Sage had offered, sources have said.

Newcastle-headquartered Sage, which supplies more than six million small and medium sized companies with accountancy software, issued a statement yesterday to confirm that it had received a "claim for damages made by Archer Capital following the termination of discussions between Sage and Archer relating to the potential purchase." Sage said that it "strongly rejected the claim" and that it intends to "defend itself vigorously."

Sages share price fell by 1.2 per cent following the announcement.

In its most recent trading statement for the nine months to the end of June, Sage said that it was set for future growth despite an uncertain economic backdrop which had prompted many SMEs to rein in their spending. Guy Berruyer, its chief executive who took over from long-time boss Paul Walker in October, said confidence among SMEs had improved, although it varied by geography and the outlook remained uncertain.

At the time the business reported that cash generation was strong and that it had slashed its net debt by £39m to £67m over a period of three months.

In the first six months of its financial year, Sage's sales climbed by three per cent to £742.7m and profits increased by four per cent to £183.5m.

Founded in 1981 and floated on the London Stock Exchange in 1989 it has about six million customers worldwide, 13,400 employees and operates in over 24 countries. One in three workers in the UK are paid using Sage payroll software.