Dye and Durham will need to sell two businesses to secure Link approval: market analysts

Software firm Dye and Durham may have to sell two businesses if it wants to gain competition approval for its acquisition of Link Administration.

Dye and Durham would likely have to sell both its Global X and SAI Global businesses if it wants to gain competition approval for an acquisition of Link Administration Holdings, say market analysts.

But given the deterioration of the share market conditions since it first made its $3.5bn proposal to buy Link, the thinking now is that the Canadian listed firm may be happy to walk away.

Dye and Durham’s shares have fallen sharply since it first made the $5.50 a share offer in December.

They last traded at $C22.10, down from more than $40 six months ago.

The Australian Competition and Consumer Commission on Thursday sent a strong signal to both Link and Dye and Durham that it did not want a deal to proceed.

It takes exception to the impact that the deal will have on the conveyancing sector, one amid an electronic digital transition.

The deal would see Dye & Durham acquire 43 per cent of Pexa Group that Link currently owns.

Dye & Durham last year purchased property settlements and workflow solutions business GlobalX for $C166m ($183m) after it entered the Australian market with the $91m acquisition of property and business information provider SAI Global Property.

Dye & Durham provides information broking services, conveyancing and legal practice management software and manual property settlement services in Australia while PEXA operates an electronic lodgement network which facilitates digital conveyancing settlements.

“The proposed acquisition would align PEXA, a near monopoly provider of Electronic Lodgement Network services, with Dye and Durham, a significant supplier of software to lawyers and conveyancers, significantly increasing vertical integration in this industry,” the ACCC said.

“We have significant preliminary concerns that this transaction would enable Dye & Durham 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 chair Mick Keogh said ahead of a final decision being handed down on September 8.

Shares in Link closed down 10.4 per cent on Thursday with the market betting a deal between both parties will now likely be off.

One possibility is that Dye & Durham lowers its price or another suitor comes forward with another offer below $5.

FNZ, advised by Citi, bid for Link’s RSS business in March, offering $1.5bn and may come back with another offer, although it would likely be lower.

But even if that were to be the case, most believe that the Michael Carapiet-led board would be unlikely to approve a transaction.

DataRoom reported on May 11 that competition clearance for the Dye & Durham transaction was looking increasingly unlikely.

Link is an Australia-based company engaged in providing services to the superannuation administration industry.