Link Administration Holdings (ASX:LNK) share price jumps 11%. Here’s why

Highlights

  • Australian fintech Link Administration Holdings has received a proposal for a possible takeover from US-based private equity firm Carlyle Group. 
  • The takeover bid of over AU$2.8 billion is to acquire 100% of the shares in Link Group by way of a Scheme of Arrangement. 
  • Carlyle proposed to acquire Link in October last year; however, the offer was turned down by Link Group. 

US-based private equity firm Carlyle Group Inc. has approached Australian fintech Link Administration Holdings Limited (ASX: LNK) about a possible takeover, launching a bid of over AU$2.8 billion to control 100% of LNK shares.

Following the significant update from Link Group, its shares on the ASX edged up around 11%, trading at AU$4.810 on 5 November 2021 (AEDT: 1:21 PM). 

However, this is not the first time when Link Group has received a takeover bid from Carlyle, which offered to acquire Link in October last year. Link Group turned the non-binding indicative proposal back then, citing that it materially undervalues the business.

Moreover, Link Group also received a bid offer from SS&C Technology Holdings in December 2020, which was later withdrawn after LNK indicated that the proposal does represent compelling value for the business. 

Indicative Proposal, Takeover

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What is the latest proposal from Carlyle?

Link has received a conditional, non-binding indicative proposal from Carlyle Asia Partners V, LP to acquire 100% of the shares in Link Group by way of a Scheme of Arrangement. Notably, investment fund Carlyle Asia Partners is advised and managed by Carlyle Group’s affiliated entities. 

Under the latest proposal, the consideration comprises AU$3 per LNK share in cash in addition to a pro-rata distribution of Link Group’s shareholding in PEXA Group Limited (ASX:PXA) to the Company’s shareholders. It is valued on a lookthrough basis at AU$2.38 per LNK share as at 4 November 2021. 

ALSO READ: Link confirms PEXA’s ASX-listing; here’s how shares may react

Based on this lookthrough valuation, each LNK share is valued at AU$5.38 in the proposal, representing a 24.2% premium to the last close.

The proposal is subject to several conditions, including due diligence, securing debt financing, and negotiation and execution of transaction documentation. 

Link Group to consider the proposal

Link Group in its update has highlighted that the Board would consider the proposal. The Group understands that the proposal would also require final investment committee approval from the relevant Carlyle committees along with certain regulatory and other approvals, and thus plans to obtain advice from its financial, legal and tax advisers. The Group has appointed Herbert Smith Freehills as its legal adviser and Macquarie Capital and UBS as its financial advisers. 

RELATED ARTICLE: Why could Link Administration (ASX:LNK) be worth more?

Considering the proposal, Link Group is suspending its on-market share buyback. As of 4 November 2021, Link Group had repurchased ~23.24 million shares for a value of ~ AU$101.7 million out of the announced total buyback size of up to AU$150 million.

The Company indicated that shareholders do not need to take any action concerning the proposal and that there is no certainty that the proposal will result in any transaction.

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