Link Administration Holdings Ltd (ASX: LNK) is set to be acquired by Canadian headquartered Dye & Durham for AU$3.5 billion (C$3.2 billion).
This morning, the Link share price entered a trading halt pending a “potential control transaction”.
Subsequently, the business announced it had entered into a Scheme of Arrangement with Dye & Durham.
D&D with a bumper offer
Link shareholders will receive the following as consideration:
- Base consideration of $5.50 per share in cash plus a $0.03 per share interim dividend fully franked
- A $0.08 per share special dividend fully franked, which will be deducted from the base consideration
- Potentially $0.15 per share from the sale of the Banking and Credit Management (BCM) division
The deal values Link’s equity at $2.9 billion and implies an enterprise value of $3.6 billion on a fully diluted basis.
The purchase price represents a 15% premium to Link last trading price and a 27% jump from its resting share price before it received a $5.38 per share bid from Carlyle Group.
As part of the deal, Dye & Durham will acquire Link’s 42.8% shareholding in PEXA Group Ltd (ASX: PXA).
LNK share price
Commenting on the acquisition, Matthew Proud, CEO of Dye & Durham said:
“This transaction will enable us to expand our proven model into adjacent markets, where Link Group’s products share the same attributes of our existing offering: digital infrastructure-like assets that provide essential services to clients and their customers…”
Lurking in the shadows
Dye & Durham’s decision to purchase Link is a surprise to most of the market, given Carlyle Group was provided due diligence to come to the table with a better offer.
Known to few at the time, Dye & Durham also expressed its interest in Link Group with a condition of commercial confidentiality.
After five weeks, Link had heard nothing from Carlyle. And Dye & Durham had put a superior offer on the table.
The Link Board has endorsed the deal to shareholders, in the absence of a superior offer and independent expert ticking off the deal.
My take
Dye & Durham, might be purchasing Link, but it looks like PEXA is the main prize here.
Per Dye & Durham’s own “About Me” section, PEXA fits this description more than the remainder of the Link business:
“Dye & Durham is a leading provider of cloud-based software and technology solutions designed to improve efficiency and increase productivity for legal and business professionals”.
This is supported by the Canadian company’s willingness to pass on net proceeds from the BCM division sale and its future divestment of the Funds Solutions Business.
There has already been substantial private equity demand over the past 18 months for the core Link assets.
Possibly, Dye & Durham will spin off those assets and go after the remainder of PEXA?
Overall, it looks like a win for Link shareholders given the share price has been on a downhill slope for the better part of five years.
