Shares in Link Group are due to resume trading later today with the bulk off the $883 million fund raising to fund its big UK push tucked away.
The raising was priced at $6.75 a share which was a 13.8% discount to its close last Friday.
Unlike the last big raising – Downer’s attempt to get $1.1 billion from the market and shareholders which was a partial success with being heavily undersubscribed, Link’s raising looks like going off a treat.
The $883 million being raised will go to fund just over half the $1.49 billion purchase of the Capita asset management business in Britain.
Analysts yesterday chewed over the deal with Macquarie claiming that Link’s $1.5 billion UK acquisition could be 30% accretive to earnings per share post synergies in the next three to five years.
In other words it will take three years before some benefits start emerging.
But Macquarie also warned that Link’s shares could weaken as the market adjusted to lower price to earnings multiple, reflecting risks associated with integrating its new purchase and the massive expansion of the capital base.
"While the deal is highly accretive to EPS the market was arguably pricing in LNK’s financial flexibility and scope for potentially accretive acquisitions," Macquarie analysts told clients.
"To that end we would expect some of the EPS upside to be offset by integration risks and exposure to an arguably lower growth EU market."
UBS analysts said it was a big step offshore for Link, although buying Capita’s asset services business was in line with Link’s stated inorganic growth strategy.
UBS analysts reckon the deal will be 13 per cent earnings per share accretive in the medium term and also flagged integration risks.
"With Superpartners synergy realisation still to complete, deal indigestion and management distraction are key risks," UBS told clients.
"However, with the timing of this vendor-driven sales process outside Link’s control and management well versed in integrations, we believe the longer-term strategic benefits and potential value upside is worth the risk."
The unstated fear seems to have been, is this a rerun of the debacle that followed Slater and Gordon’s $1 billion plus push into the UK almost two years ago.
It all depends on the quality of the due diligence, the execution of the merger and integration and now disasters along the way.
