Link Group shares punished after $3bn SS&C Technology bid pulled

Investors punish Link shares as Nasdaq-listed SS&C Technology Holdings scraps its $3bn offer.

Link Group’s board led by chairman Michael Carapiet had rebuffed the SS&C offer last month. Picture: James Croucher

SS&C Technology Holdings’ scrapping of a $3bn offer for ASX-listed Link Group has triggered a pummelling of the target’s shares, as bidding tension for the financial services group evaporated.

Link on Monday told the ASX it received a January 3 letter from Nasdaq-listed SS&C stating it “has withdrawn” its indicative bid for the company.

Attention at the under-pressure share registry, superannuation administration and financial services company now turns to a potential sale or demerger of its stake in online conveyancing firm PEXA.

The news of SS&C’s bid retreat prompted a sharp sell-off in Link’s shares which tumbled 13.5 per cent to $4.80 in Monday’s trading, closing at the stock’s lowest level since November. The drop reflects dissipated prospects of a bidding war against a private equity partnership for the group.

SS&C lobbed the offer in early December at a price of $5.65 per Link share, assuming no further dividends, distributions or reductions in capital would be paid. The SS&C proposal was, though, subject to a number of conditions, including due diligence, and obtaining debt financing on acceptable terms.

“The Link Group board will continue to consider all alternatives to maximise value for shareholders. As previously announced, this includes a potential separation by way of demerger of Link Group’s interest in Torrens Group Holdings (TGH) (and its core asset, PEXA),” Monday’s ASX statement said, not elaborating on the reason for the withdrawal of SS&C’s offer.

“Link Group will also explore a trade sale of its interest in TGH from 18 January 2021. Shareholders do not need to take any action in relation to any proposal. If there are material developments in the future, Link Group will inform shareholders as required under its continuous disclosure obligations.”

Link owns a 44 per cent interest in PEXA. The financial services group, Morgan Stanley Infrastructure and Commonwealth Bank agreed to acquire PEXA in late 2018, to capitalise on a shift to mandated electronic property settlements over traditional paper-based settlements.

Despite granting SS&C due diligence around its offer, Link’s Michael Carapiet-led board had rebuffed the bid in December saying it did “not represent compelling value” for investors.

Private equity groups Pacific Equity Partners and The Carlyle Group have been jointly stalking Link, but had a sweetened $5.40 a share offer knocked back. The PEP and Carlyle bid has been supported by a several Link shareholders including the Bennelong Long Short Equity fund, Solaris Investment Management and Investors Mutual, albeit some investors have sold down their holdings in recent weeks.

Investors Mutual portfolio manager Michael O'Neill said Link’s PEXA stake was the “hidden jewel”, and the withdrawal of SS&C from the bidding contest still left investors with three options, including the trade sale of the PEXA holding.

“That (withdrawal of SS&C) opens the possibility for bid tension on the PEXA side,” he added. “It could actually make things easier if there is a trade sale (rather than a demerger) of the PEXA holding.”

PEP knows Link well after it listed the company at $6.37 per share on the ASX in 2015, following a period of ownership as a portfolio company in the private equity house’s stable.

Separately, new Link chief executive Vivek Bhatia presented a business update to shareholders on December 9, providing guidance for the first-half of 2021 and outlining the strategic focus and priorities.

That included raising the target for annualised benefits stemming from a transformation program to $75m, but also lifting the targeted leverage ratio range.

Morgan Stanley analysts last month highlighted several downside risks for Link, including the takeover bids collapsing and acceleration of super account consolidation.