Link tumbles on twin blow: ACCC probe & pending lawsuit

Thu 16 Jun 22, 2:16pm (AEST)

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Key Points

  • The ACCC has raised concerns over the "vertical integration" should Dye & Durham acquire the company
  • Link shareholders vote on the proposed takeover July 13
  • Link will soon be served with a class action that relates to the freezing of a GBP3.7bn investment fund

Just when the market was starting to pick itself up off the floor, up around 0.65%, Link Administration (ASX: LNK) encountered sufficient bad news to see the administration services company’s share price down -10% at noon.

Today’s bombshells include revelations that the competition regulator (ACCC) has raised concerns over the "vertical integration" of the company’s $3.5bn takeover by Dye & Durham (D&D).

But if that wasn’t enough, shareholders are also having to contend with news of potential litigation in an English Court.

ACCC probe

Firstly, the ACCC’s major preliminary competition concerns relate to the conveyancing sector.

Combining D&D and Link isn’t of itself a showstopper.

But by acquiring Link, D&D would gain the 42.77% shareholding in PEXA Group (ASX: PXA) that Link currently owns.

ACCC deputy chair Mick Keogh believes the proposed acquisition would align PEXA, a near monopoly provider of Electronic Lodgement Network services, with D&D - significant supplier of software to lawyers and conveyancers - hence significantly increasing vertical integration within this industry.

“We have significant preliminary concerns that this transaction would enable D&D and PEXA to engage in mutual preferential dealing that would hinder existing competition or raise barriers to entry in one or more markets in the conveyancing workflow,” Keogh noted.

Will the deal fall over?

Link’s takeover deal with Dye & Durham is the fourth takeover offer the company has received in recent years.

Meantime, the Link Group Board appears to be unconcerned by the ACCC’s investigations and vows to “unanimously recommend” shareholders vote in favour of the proposed Dye & Durham acquisition.

Link says it will continue to work closely with D&D to move along the competition approval process.

Investors should note that while Link Group Shareholders vote on the proposed Scheme on July 13, 2022, it will be early September before the ACCC expects to announce its final decision.

What will clearly weigh on the minds of Link's acquirer is news today of a major lawsuit in the UK.

Class action

Without going into the histrionics, Link will soon be served with a class action that relates to the freezing of a GBP3.7bn investment fund with around 300,000 investors.

The Link-administered fund, the LF Equity Income Fund - previously the Woodford Equity Income Fund – has been plagued by scandal after it suspended in 2019 and investor funds were frozen from withdrawals.

The fund is estimated to have lost more than GBP1bn in value since being frozen.


Link Administration share price over 12 months.

What brokers think

Link is down -32% over the last year, with the share price tumbling from $5.08 early May to $3.35.

Consensus on the company is Moderate Buy.

Based on Morningstar’s fair value of $5.32 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 63.1% upside to the target price of $5.53.

While looking somewhat tenuous, Ord Minnett believes a successful $5.50 takeover bid by Dye and Durham for Link would imply upside of around 12% (from a discounted share price) within three months.

Should the takeover not proceed the broker suspects there may be some floor support for the company due to a non-binding bid for the Retirement and Superannuation Solutions Retirement division from global investor FNZ Group.

The broker retains a Hold and target price of $5.40.

While Morgan Stanley believes recent FY22 guidance was positive, the broker believes Link needs to undertake a multi-year investment program to deliver on these options and retains an equal-weight rating and $5.50 price target. (02/03/22).

Written By

Mark Story


Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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