The Days of Our Lives deal of Australian finance – Link Group’s multi-year attempts to sell itself – looks like it’s about to enter its final episode.
It’s been an on, off, on, off, on process that has meandered through more than half a dozen bids, quasi bids, expressions of interest and who knows how many other tire-kickers who couldn’t summon the enthusiasm or find the money to create and pitch one of those non-bonding bids/expressions of interest.
The winner of this soap opera could be Canadian suitor Dyer and Durham with its 4th or 5th bid since last December.
But the winner is only provisional – the final decision on whether the takeover happens will be made by the competition watchdog, the ACCC which has already expressed big concerns about the takeover and a major ant-competitive component of the transaction.
If the ACCC says no, the deal is sunk unless the Canadian company sells off a major asset.
Link has agreed to accept a lower price from the Canadians after days of off-stage negotiations with the aim now a ‘quick’ end to the drama by a September 30 deadline.
The Link board says it will recommend shareholders accept the revised proposal of $4.81 a share, which is 12.5% lower than an original buyout deal of $5.50 revealed last December.
The new bid values Link at $2.47 billion, compared with the original $2.9 billion.
And the new, lower price has a story of its own.
Back in 2020, Pacific Equity Partners (PEP), Carlyle Group and their affiliates pitched a $5.30 a share offer for Link that eventually went nowhere.
PEP floated Link on the ASX in 2015 at $6.37 a share before they sold the rest of shares less than 12 months after listing, at $8.38.
Now the offer price is $4.81!
In a statement to the ASX on Thursday Link said it had agreed to amend the scheme implementation deed signed between the two companies in December last year under which Dye & Durham had originally offered $5.50 per share.
“The Link Group board unanimously recommends that Link Group Shareholders vote in favour of the revised scheme in absence of a superior proposal and subject to the independent expert concluding and continuing to conclude that the revised scheme is fair and reasonable and in the best interests of Link Group shareholders,” the firm said.
Link said that all of its directors intend to vote in favour of the revised scheme at the scheme meeting which is now due to occur in mid-August after previously being postponed.
Dye & Durham cut its offer price to $4.30 a share in June to reflect an undertaking the firm was considering providing to the ACCC in order to obtain its approval along with “the current state of the financial markets and values of both the Link Group and the shares in the PEXA electronic property settlement company
The Canadian cloud computing company then lifted the offer to $4.57 after the $4.30 bid was rejected. Link knocked that one back as well and it looked like the deal would fall over.
Talks continued and market rumours have been swirling for several days that a settled deal might soon emerge, which it seems to have done on Thursday.
In addition to the base scheme consideration of $4.81 a share, Link shareholders would also be entitled to receive up to 13 cents a share if Dye & Durham reaches an agreement to sell Link’s banking and credit management (BCM) business.
“Under the revised scheme, Dye & Durham remains obligated to use its best endeavours to pursue the sale of the BCM business for a period that continues to 12 months after the implementation of the revised scheme.” Link said on Thursday.
“Link Group notes that it has been advised by Dye & Durham that it will shortly appoint financial advisers to sell Link Group’s BCM business and will commence this process immediately following implementation of the revised scheme.”
The revised scheme remains subject to court and regulatory approvals and other customary conditions in addition to approval from Link shareholders.
But the ACCC is the major barrier to the deal being completed. It detailed its significant preliminary competition issues with the Link bid in a statement in June.
The ACCC made it clear it had considerable reservations about the acquisition which would also see the Canadian firm buy a 42.7% shareholding in PEXA, the electronic property settlement company which would be added to key software the Canadian company supplies for property dealings.
Dye & Durham (D&D) currently provides information broking services, conveyancing and legal practice management software, and manual property settlement services in Australia, while PEXA facilitates digital conveyancing settlements through its electronic lodgement network.
“It is the potential vertical integration of D&D’s operations and PEXA that gives rise to the competition concerns,” the ACCC said in a statement of issues.
“The proposed acquisition would align PEXA, a near monopoly provider of Electronic Lodgement Network services, with D&D, a significant supplier of software to lawyers and conveyancers, significantly increasing vertical integration in this industry,” the ACCC said in the statement.
These reservations and the sell off in markets in June and early July saw the Canadian company lop its $5.50 a share bid 22% to the $4.30 level, which was rejected.
Unless the two companies can find a way to satisfy the ACCC, the deal won’t be done and the soap opera will end with the audience not knowing who won the heart of the maiden.
Investors, though, are remaining cautious, given the ACCC’s unease. They bid Link shares up more than 12% yesterday after the deal was revealed. The closing price though of $4.46 is well under the $4.81 now on the table. That’s the market being sceptical about the result.
