The owners and potential buyers of Link Administration face a dilemma over what should be done with the $2.9bn takeover target.
US-based private equity giant Kohlberg Kravis Roberts and the Nine Entertainment-backed Domain are understood to be exploring a move to team up with Pacific Equity Partners and Carlyle to make a full bid for Link.
However, the challenge for PEP and Carlyle is that KKR and Domain only want to buy the 44 per cent interest in Property Exchange Australia.
Other parties could be prepared to pay a higher price for PEXA than Domain and KKR are able to offer, which may place Carlyle and PEP at a disadvantage.
Shareholders in Link are keen for the board to accept a knockout bid for all of the company if the private equity consortium puts one on the table and call off the sales process for the PEXA stake.
Yet most believe the board is not prepared to accept any offer for the business until the conclusion of a PEXA sales process.
Link is running a dual track process for PEXA, considering an initial public offering by September or a sale of its stake.
However, most now deem an IPO of PEXA unlikely, with 17 parties signing non-disclosure agreements to enter a data room to weigh up whether to acquire the 44 per cent interest.
First-round bids are due next month. Front of mind for investors is whether PEXA is an infrastructure-like asset and what the growth prospects are for the group in Britain.
PEXA is also 40 per cent-owned by Morgan Stanley Infrastructure Partners, which is thought to be open to a float, but the remaining shareholder, CBA, is not so keen.
DataRoom revealed the talks between KKR, Domain and Carlyle and PEP last week.
PEP, a previous owner of Link, and Carlyle made a bid for Link in October at $5.40 a share, equating to about $2.9bn, or about $2bn without the PEXA interest.
The offer was rejected but the parties were allowed to undertake due diligence.
Shareholders at the time were offered the option of retaining the PEXA stake and getting just $3.80 a share for the remaining part of the business.
Link is advised by UBS and Macquarie Capital.
UBS, Macquarie Capital, Morgan Stanley, Barrenjoey Capital Partners, Flagstaff Partners and Lazard are working on the IPO.
PEXA is Australia’s first and only full-service electronic lodgement network operator.
Its core product is the PEXA exchange, which provides integration with land titles offices and state revenue offices, electronic lodgement services and near real-time settlement of funds via the Reserve Bank.
Jefferies Australia and Carlyle are working with KKR and Domain and PEP is advised by Jarden and Credit Suisse.
Other groups expected to line up include Macquarie Infrastructure and Real Assets, and Partners Group.
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