Link re-enters trading halt to consider Dye & Durham’s latest offer

By Market Index
Wed 05 Oct 22, 11:25am (AEST)
Source: Unsplash

Key Points

  • Dye & Durham now wants to acquire Link Group’s Corporate Markets business and all of the BCM business for $1.27bn on a cash and debt free basis
  • Legacy liabilities worth up to $600m put Dye & Durham off buying Link outright
  • Dye and Durham is attracted to Link's corporate markets business and its 42.8% stake in Pexa Group

The off-again on-again antics between Link Administration (ASX: LNK) and its would-be acquirer Dye & Durham continued this morning, with the former confirming it is now in receipt of three proposals [from the latter] and has entered a trading halt to try and figure out what to do next.

If you’ve been following recent developments, you’ll know that Dye & Durham’s long and drawn out $2.5bn buyout of Link in its entirety fell over late last month.

The Canadian legal software group decided not to proceed following concerning revelations surrounding the fines and rulings outlined by a British financial regulator over the 2019 collapse of a Woodford investment fund administered by a Link UK subsidiary.

$600m in legal liabilities

Dye & Durham’s CEO Matthew Proud concluded that fines surrounding the Woodford investment fund collapse undermined the economics of the original proposal and caused unexpected “legacy liabilities” - worth up to $600m - which were not fair for Dye & Durham shareholders to have to absorb.

Nevertheless, it's no secret that Proud still believes Link has some very attractive businesses and assets including corporate markets and a 42.8% stake in electronic conveyancer Pexa Group (ASX: PXA).

In response to recent media speculation, Link’s update this morning outlined the three offers the board has received over the past week.

Today’s update found immediate favour with the market with the share price up 6.69% at the open.

What’s on offer?

Offer one: Received last week is a proposal to acquire Link Group’s Corporate Markets (CMB) business for $950m.

To the uninitiated, the CMB runs the share registries of about 1800 companies on the ASX and also provides company secretary support services.

Offer two: Received on 2 October is a proposal to acquire its Corporate Markets business and parts of the Banking and Credit Management (BCM) business other than the business which deals with and holds non-performing loans for $1.1bn on a cash and debt free basis.

Link’s board has already flagged it has no intention of proceeding with the two above mentioned bids.

Offer three: Received October 5 is a proposal to acquire Link Group’s Corporate Markets business and all of the BCM business for $1.27bn on a cash and debt free basis.

Link expects to update shareholders during the next week on whether it plans to proceed with offer three or not.

What brokers think

Link’s share price is down -28% in the last 12 months.

Consensus on Link is Hold.

Based on Morningstar’s fair value of $5.04 the stock appears to be undervalued.

Based on the six brokers that cover Link (as reported on by FN Arena) the stock is currently trading with 34.4% upside to the target price of $4.03.

Link Administration share price over 12 months.


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