Link engages with Dye & Durham on $1.27bn proposal

The ASX-listed group has ‘engaged’ with Canada’s Dye & Durham on a non-exclusive basis about its $1.27bn proposed offer for parts of the business.

Link Group is engaging in non-exclusive talks with Dye & Durham over the Canadian firm’s $1.27bn proposal to scoop up Link’s corporate markets and BCM businesses.

Close to a year after software and technology company Dye & Durham first announced its acquisition of Link for $3.25bn Canadian dollars — a deal that fell over in recent weeks — the ASX-listed company on Monday gave investors a glimmer of hope, but cautioned there was no guarantee the discussions would lead to a transaction.

“Link Group has engaged with D&D on a non-exclusive basis to see if the conditional non-binding proposal can be progressed to a transaction that will provide sufficient value and certainty, on appropriate terms, to Link Group,” the company said in a statement to the market.

“No assurance is given that the proposal will lead to a transaction.”

Dye & Durham last week lobbed a fresh $1.27bn bid for part of Link, just weeks after its drawn-out takeover of the whole company fell over at the last hurdle after demands from Britain’s financial regulator that proved too rich for the Canadian group.

Britain’s Financial Conduct Authority, just days ahead of a September 30 deal deadline, demanded the suitor commit to setting aside £306m ($519m) to cover potential payouts linked to a failed Link-administered fund.

The FCA put this as a condition of its approval of the takeover, which spooked Dye & Durham even as Link vowed to fight any penalties imposed on it over the collapse of the Woodford fund in 2019.

In the wake of the UK regulatory roadblock, Dye & Durham slashed its $4.81 a share offer for Link by $1, structuring the new deal as an upfront cash payment of $3.81 per share payable on implementation of the takeover scheme plus a contingent payment, subject to conditions.

The suitor proposed a $1 per share top-up payment to Link’s shareholders if the FCA concluded, within two years, that Link was not liable for any redress payments related to the Woodford fund collapse.

Link rejected the revised $3.81 a share offer, saying it would look at alternatives for the business, including an in-specie distribution of a minimum of 80 per cent of Link’s 43 per cent shareholding in ASX-listed PEXA, “in order to maximise value for investors”.

Link on Monday confirmed that it would continue to engage with applicable regulators, including the Australian Taxation Office in relation to a potential in-specie distribution to Link shareholders of a minimum of 80 per cent of Link’s shareholding in PEXA.

Ord Minnett analysts, meanwhile, said the new $1.27bn offer for part of the business appeared to be “quite a full bid” and, if accepted, would remove any risk of a capital raising.

But they also raised concerns that a takeover of Link’s corporate markets business would still require approval from Britain’s financial regulator.

“It is not clear whether the FCA would allow the corporate markets sale to proceed unimpeded,” they warned.

“It is also unclear what the tax consequences of the deal are and what it means shareholders will get back as proceeds.”

Ord Minnett also noted other interest in Link’s retirement and superannuation business, including the $1.5bn offer last March from global wealth management company FNZ Group. At the time, Link said this offer was not as favourable as Dye & Durham’s, which was for the whole business.

“We think it would be feasible to find buyers for most of the other assets of Link,” the analysts said.

“The implied prices appear well above the current share price of Link.”

Link shares closed up 0.31 per cent at $3.23.