The board of Link Group (ASX: LNK) has today shown it will not accept what it views as lowball offers, rejecting a downgraded takeover bid from Canadian software company Dye & Durham that slashed $600 million from its proposal.
The digital superannuation and share administrator agreed to a C$3.2 billion ($3.6 billion) offer in December, but fast forward six months and the situation was looking very different - in June the competition regulator raised concerns over the deal, and the suitor revised its offer downward.
This meant what was a $5.50 per share offer was cut to $4.30 in late June, on the grounds that turmoil in financial markets dictated a lower valuation.
The Canadian group then upped its offer slightly to $4.57 per share last week, valuing Link at roughly $2.95 billion.
It is a valuation that is still substantially higher than the $3.82 closing price for LNK shares the day prior, but today's response demonstrates an optimistic long-term vision from the board that is also backed by an independent expert valuation.
Link also indicated there were other alternatives for larger bids if the deal did not go through, with the independent expert concluding a higher underlying value of Link Group shares. With these considerations in mind, as well as feedback from shareholders, the board made the call to not recommend the proposed takeover.
What remains unclear from the revised bid and the announcements from Link is what undertaking Dye & Durham is proposing to make to the Australian Competition and Consumer Commission (ACCC) to obtain approval.
If the proposed takeover goes ahead, Dye & Durham will acquire Link’s 42.77 per cent stake in PEXA Group (ASX: PXA). This possibility has seen alarm bells ring at the ACCC, which is concerned about the impacts on competition in the property sector.
In Australia, Dye & Durham provides information broking services, conveyancing and legal practice management software and manual property settlement services. PEXA operates an Electronic Lodgment Network, which facilitates digital conveyancing settlements.
“Consumers may not be familiar with these companies in name, however this acquisition is relevant to anyone buying or selling property,” ACCC deputy chair Mick Keogh said last month, after highlighting that the conveyancing sector is in a transitional period as it moves to electronic conveyancing and digitalisation.
Link continues to engage with Dye & Durham but intends to evaluate alternatives for the business, including selling a minimum of 80 per cent of its shareholding in PEXA if the pair cannot reach a satisfactory agreement.
As stipulated in the original deal, Link would receive any net consideration from selling its banking and credit (BCM) management business up to 12 months after implementing the scheme - Link received an $86.5 million offer for that business in November 2021.
Sydney-based Link also announced today its preliminary unaudited FY22 results were slightly above guidance, with revenue for the year reaching $1.175 billion and operating EBITDA reaching $250 million.
The business has forecast that its FY23 revenue is due to increase by a low single-digit percentage, with operating EBITDA projected to be 8-10 per cent higher than FY22.
Shares in Link (ASX: LNK) are currently valued at $4.02 per share after rising by 5.79 per cent over the past five days.
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