ACCC outlines concerns over $2.9bn Link Administration bid from Dye & Durham

Dye & Durham’s $2.9bn bid for Link Administration has hit a serious roadblock after the competition regulator outlined ‘significant preliminary competition concerns’.

Link chairman Michael Carapiet.

Canadian group Dye & Durham’s $2.9bn bid for Link Administration has hit a serious roadblock after the competition regulator outlined “significant preliminary competition concerns”.

The Australian Competition and Consumer Commission’s concerns relate to the 43 per cent shareholding Link owns in the separately listed PEXA Group, rather than the tie up between Link and Dye & Durham.

PEXA is Australia’s only fully operational electronic property settlements business, and Dye & Durham provides information broking services, conveyancing and legal practice management software and manual property settlement services.

“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,” ACCC deputy chairman Mick Keogh said.

Dye & Durham has not said if it would consider selling the PEXA shareholding in order to proceed with the bid, as it may be part of what made Link attractive in the first place. The company last year purchased GlobalX, one of the software providers lawyers use to access PEXA.

The market had been pricing in trouble with the takeover, causing the gap between the offer price of $5.50 per share and Link’s actual share price to start widening from May. Link shares closed at $3.35, down 10.4 per cent on Thursday’s announcement. Its shares have fallen 40 per cent this year, despite the takeover bid.

ACCC deputy chairman Mick Keogh.

Shares in Dye & Durham have also been under pressure, in part because of the wave of sell-offs in tech stocks, but also on concern about the takeover of Link. Its shares have dropped by 49 per cent this year.

The shareholder vote is on July 13 but the ACCC is not due to outline its final decision until September 8, just one week before Dye & Durham’s hard deadline on its bid on September 30.

Link is Australia’s biggest provider of services to the superannuation administration industry and is also a share registry group.

Link said in a statement that the ACCC view was not a final decision and that it would continue to work with D&D to progress the competition approvals process and all other regulatory approvals. “The Link Group board continues to unanimously recommend that shareholders vote in favour of the proposed acquisition in the absence of superior proposal and subject to the independent expert continuing to conclude that the scheme is fair and reasonable,” the company said in a statement.

The two companies may have their work cut out for them, with the ACCC pointing to the critical role conveyancing plays in property markets in Australia.

“The proposed acquisition would align PEXA, a near monopoly provider of electronic lodgement network services, with D&D, a significant supplier of software to lawyers and conveyancers, significantly increasing vertical integration in this industry,” the regulator said.

It’s likely that Link will argue that PEXA has a separate board and would not break the law by favouring Dye & Durham’s workflow provider for conveyancing activities, as they would be breach of their regulatory obligations.

The Dye & Durham takeover offer has formed part of two busy years for Link Administration. The company had initially received a buyout proposal from The Carlyle Group and Pacific Equity Partners, which did not proceed after due diligence but was the trigger for Link to list its PEXA unit on the ASX last year.

Carlyle and PEP came back to discuss buyout options again after the PEXA float but were left at the aisle when Dye & Durham lobbed its $5.50 per share offer.