Link Group (LNK) will pay nearly $A1.5 billion to move into the UK asset management business and is expected to announce a massive cash raising this morning to pay for the transformative deal.
The company is likely to ask for its shares to be suspended to allow the fund raising to start with an offer to big institutions. Details of a shareholders meeting to approve the deal should also be announced.
Link will pay Capita plc 888 million pounds (or $A1.49 billion), according to a statement early Saturday (http://www.capita.com/news/news/2017/sale-of-capita-asset-services-to-link-group/).
(And let’s hope it is not a repeat of the disastrous loss making move into the UK by Slater and Gordon almost two years ago) The value of the UK acquisition is more than 50% of Link’s market value on Friday of just over $2.8 billion, so it will be a transformative deal one way or the other.
The shares ended at $7.83, up a while 3 cents over the week and 4.25% year to date. The announcement early Saturday morning from UK group, Capital confirmed days of speculation that Link had won a competition to buy the business from the struggling UK outsourcing group.
The speculation forced Link to issue a statement on June 21 that sort of owned up to being interested in Capita’s business, without confirming that a deal was near.
Reuters had reported that US private equity fund GTCR and European rival CVC Capital Partners were among a group of three buyout funds competing with Link for one of Capita’s key businesses.
Capita, which specialises in providing IT-enabled business services to banks and investors, the UK’s National Health Service, retailers and utilities, has been forced to sell assets after hitting profitability problems last year and this year in the wake of the Brexit vote a year ago on Friday.
It has issued a series of profit warnings over the past year and say the sale to Link will help it raise cash and cut debt.
The company’s chief executive Andy Parker resigned in March after it reported a bigger than expected drop in profit and said it would take until 2018 before it could return to growth.
"We are delighted to announce the sale of the Capita Asset Services businesses to Link Group. In the Autumn of last year we set out a strategy to simplify and streamline Capita by repositioning the group and refocusing on delivering technology-enabled business and customer management solutions that make business processes smarter and deliver better customer service,” the departing CEO said in the statement.
Capita’s shares have dropped by 36.6% over the past 12 months, Link’s shares are up 1%.
