Link listed on the ASX in 2015 with an issue price of $6.37. The group’s shares dropped 9.2 per cent in early trading on the ASX on Thursday before making a partial recovery to close 1.5 per cent lower for the day at $3.33.
Link said discussions had now ended on the conditional, non-binding $1.27 billion buyout proposal made on October 5 for Link’s corporate markets business and its banking and credit management operations.
Talks between the duo ended after Vancouver-based Dye & Durham said it only wanted to buy the corporate markets business.
Deterioration in revenue
“The latest form of the conditional non-binding proposal from Dye & Durham involved a material portion of the consideration being deferred and payable after a two-year period,” Link said in a statement to the stock exchange.
Mr Bhatia said the shift in capital markets and rising rates meant funding had become tougher for buyouts, and Link now wanted to move on after an uncertain time for its staff. “We would like to draw a line under it,” Mr Bhatia said.
Dye & Durham had revamped its proposal after becoming nervous about the trajectory of the operations, a company spokeswoman said.
“We recently submitted a revised bid for only Link Group’s Corporate Markets business at a price that reflects the deterioration in the revenue and earnings profile of the business since the start of the year,” she said.
“While we believe these businesses continue to have attractive characteristics and would be accretive to Dye & Durham, we are not willing to do a deal at any price.”
Link Group said on October 20 it was looking to sell the troublesome British business Link Fund Solutions, whose mounting liabilities of as much as $600 million over a Woodford UK retail fund collapse in 2019 led to the full $2.5 billion takeover being pulled in late September by Dye & Durham.
Uncertainty over just how high the liabilities and future payouts connected to Link Fund Solutions might end up was central to Dye & Durham ending its full $2.5 billion buyout plan for all of Link.
Legacy liabilities
The “legacy liabilities” totalled $600 million and included an extra £50 million ($85 million) fine imposed on September 21 by Britain’s Financial Conduct Authority (FCA), which had already asked Link to set aside $519 million before it would give clearance for the $2.5 billion buyout deal.
Speaking at Link’s AGM last week, chairman Michael Carapiet said there was still uncertainty about how the FCA matter might end up. “I can’t really give you a clear answer now because we’re in the middle of a process,” he said, emphasising the FCA had only made a draft ruling.
But there is also the prospect of further payouts stemming from class actions being run by three British law firms on behalf of aggrieved British investors in the Woodford funds.
On November 21, Link sold 10 per cent of its stake in electronic conveyancing group PEXA for $102 million, and is pressing ahead with a plan for an in-specie distribution to Link shareholders of the remainder.
Link on Thursday reaffirmed its financial 2023 outlook of low, single-digit revenue growth compared with the previous year, with operating earnings before interest and tax expected to be 8 per cent to 10 per cent higher.
Dye & Durham’s various approaches marked the fourth serious buyout proposal for Link by a succession of groups in the past two years.
US private equity firm The Carlyle Group walked away after weeks of detailed due diligence late last year, after an initial offer of $5.38 a share. That offer was made up of two components: $3 a share for the core Link business, and a pro rata distribution of Link’s stake in PEXA to Link’s shareholders.
In late 2020, Carlyle and Pacific Equity Partners pursued Link in a combined tilt in which an indicative offer reached as high as $5.40. US group SS&C Technologies made a $3 billion buyout proposal in late 2020, but pulled out after a month of due diligence.