A $2.8bn takeover bid for Link Administration Holdings by The Carlyle Group and Pacific Equity Partners could mark an impressive debut for adviser Jarden as part of its expansion in the Australian market.
But sealing the deal will be the challenge for the new Australian branch of the Kiwi firm, which has poached high-profile UBS staff to start up on the ground here.
Jarden has been named as Carlyle and PEP’s adviser for its $5.20-a-share bid for Link.
It recently recruited private equity deal maker Aidan Allen from UBS, who has a close relationship with PEP but remains on gardening leave.
The first challenge will be the four to six weeks of due diligence.
Buyout funds have a history of walking away after opening the hood on companies, and may not still be keen to put forward a bid price of $5.20 a share, as indicated in its indicative proposal to Link.
Secondly, there is the matter of securing funding.
Including about $1bn of debt, the bid equates to about $3.8bn.
It is at a 30 per cent premium to closing share price of $3.99.
Banks have been gun-shy when financing major transactions in such an uncertain environment, but the private equity firms have put forward a letter from Japanese bank Nomura and adviser Jarden expressing high confidence in their ability to provide funding for a transaction.
It is understood that Credit Suisse is also trying to get involved in funding.
However, perhaps the major challenge will be winning over the board.
Link’s share price moved as high as $9 in 2017.
Some, including Yarra Capital Management, believe the price proposed is opportunistic, but Perpetual, which holds more than 9 per cent, is in support.
But some say Link has been a perennial underperformer.
The latest offer equates to at least 24 times the net profit of the company, which they say is relatively high.
After listing, Link’s share price has been down 4.5 per cent per annum, compared to a 7.9 per cent rise for the overall ASX300 and it has downgraded earnings several times.
They also add that its rival, Computershare, is taking more market share, and the ASX is building a new platform with the blockchain technology, potentially making Link and Computershare redundant.
Its super business has recently lost major clients, and some have been critical of the European loan servicing, asset management and advisory business it purchased from Pepper Group for €165m this year.
Some suspect that other parties will soon come forward to make offers for the business, so it will be interesting to see if a bidding war emerges.
Macquarie Capital and UBS are working with Link.
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