A $2.8 billion bid from a consortium of private equity firms Link Administration looks like renewed interest in the company from other possible bidders.
The conditional, non-binding bid has come from private equity firms Pacific Equity Partners and The Carlyle Group.
Link shares leapt more than 25% to a seven-and-a-half-month high $5.10 in the first hour of trading after a pause in trading to allow the announcement to happen.
They ended the session up 25% at $4.99.
The consortium is offering to buy all shares at $5.20 for each Link share.
Link shares had closed at $3.99 on Friday.
The offer has already gained approval from investment firm Perpetual, which holds 9.65% of Link’s shares. Yarra Funds Management owns 6.6% as well.
Perpetual’s support stands in the absence of a superior offer and will expire after six months.
PEP and Carlyle’s offer valued Link’s equity at $2.76 billion With debt of around $740 million, Link has an enterprise value of around $3.5 billion. Link’s attractive asset seems to be the electronic property settlement company, PEXA.
Link owns 44.2% of PEXA’s holding company, Torrens Group Holdings Pty Ltd, after spearheading a consortium that snatched the group away from a proposed sharemarket float in 2018.
Market reports say the offer seems to be oddly structured with suggestions that existing shareholders might be allowed to join the bid and even retain the company’s stake in real estate transactions processing platform PEXA.
The AFR reported that “it is understood that PEP and Carlyle valued PEXA at about $2 billion – so if the bulls think it is worth $2.5 billion or $3 billion, they could push the company to retain the stake.”
Analysts wonder if the PEXA option happens, what happens to the $5.20 a share offer?
Meanwhile Link’s second-largest shareholder, Yarra Capital says the company should wait for a better offer as it was currently undervalued due to headwinds that were now “in the rear window”.
“Opportunities often arise when good companies hit a rough patch,” Yarra Capital managing director Dion Hershan told Fairfax Media. “The offer price which has been tabled, we don’t think is absolutely compelling.”
Mr. Hershan said the $2.76 billion offer “materially undervalued” the company’s “great assets”.
“It’s obvious to everyone that Link was trading at $6 per share in February and the business is not materially different,” Mr. Hershan said. “Listed markets can be very impatient, the long-term value that PEXA can and will create is not obvious to everyone at the moment” Fairfax reported.
