Whew, that could have been a lucky escape for investors from a nasty loss after the heavily promoted $2.2 billion float of the controversial online property conveyancer PEXA, was finally buried yesterday in favor of a trade sale.
According to statements from the Commonwealth Bank and Link Administration, PEXA will now be sold to major investors for $1.6 billion.
There’s a long way from the $2.2 billion figure and probably a good guide to the sort of pressure the share price would have been under had it managed to obtain a listing value of $2.2 billion.
As a guide shares in Domain, the website listings business controlled by Fairfax Media are down around 26% in the past month, while shares in REA Group, the industry leader, is down 9.5%. Property and especially houses are on the nose so far as investors are concerned.
Link Administration told the ASX on Tuesday that the trade sale offer from the consortium, which also includes Morgan Stanley Infrastructure and the Commonwealth Bank, was accepted by other Pexa investors representing more than 50% of the company’s issued capital.
“The consortium will pay an enterprise value of up to approximately $1.6 billion, depending on the level of acceptances to the trade sale,” said Link. Enterprise value includes debt.
Link did not mention which other investors had accepted the offer at this stage. PEXA investors, which include the governments of West Australia, Victoria, and NSW, as well as Melbourne businessman Paul Little.
The Victorian government can’t make a decision on its stake PEXA as it is in caretaker mode ahead of the state election later this month.
Pexa’s board pulled the plug on its plans to raise as much as $750 million and list on the ASX late last month after demand for stock from institutional investors fell short of expectations.
The sharp falls in the wider market saw investors shy away from a company which remains cloaked in some controversy about costs, competition.
The ACCC has expressed competition concerns about the company, while NSW state regulators insist that PEXA will not have an exclusive position so far as online conveyancing is concerned.
On top of this, there have been two, perhaps three claims of weak security that have seen customers using PEXA suffer problems with property purchases
The float was scuttled the day after the tech-heavy Nasdaq Index in the US experienced its worst day of trading in seven years.
PEXA is still making a loss, but investors expect it to profit as the $300 billion paper-driven property conveyancing industry moves online. While PEXA is currently the only operational online property lodgement and settlement network, the ASX and partner InfoTrack are expected to announce whether their joint venture (called Sympli Australia) plans will be firmed up into a competitor to PEXA. They have been examining the idea since earlier this year and have said a decision could come this month.
Both NSW and Victoria have mandated that all settlements will be online by July next year.
Link said that “Depending on the level of Final Acceptances, Link Group’s interest in PEXA will increase from its current shareholding of 19.8% to between 27% and 44%. As Link Group will fund its increased investment through available cash and headroom under its existing debt facilities, Link Group is not required to raise any equity to complete the Trade Sale Offer.”
The Commonwealth Bank CEO Matt Comyn said in a statement that “Having been a key stakeholder in PEXA since its inception in 2011, today’s announcement represents our continued commitment to support the property industry as it transitions towards an innovative, fully digital, settlements process that aims to provide improved experiences for customers.”
“The Transaction aligns with CBA’s strategy to focus on its core banking businesses and to create a simpler, better bank for our customers. As part of the Transaction, which is subject to a number of conditions precedent, CBA will invest a further $50 million, totaling approximately $100 million invested in PEXA to date. This will result in an increase in our ownership stake from 13.1% to approximately 16%.”
