Bid announced for Link
Potential Link acquisition by The Trust Bank at good price more likely than not to succeed.
Mentioned: Link Administration Holdings Ltd (LNK)
Mitsubishi UFJ Trust & Banking Corporation, or The Trust Bank, intends to acquire Link Group (ASX: LNK) via a scheme of arrangement at an implied consideration of $2.26 per share. This is significantly above our $1.50 per share fair value estimate.
We’re likely to recommend shareholders vote in favor of the scheme in the absence of a superior proposal, subject to regulatory approvals and no adverse findings in the independent expert’s report.
Link shares surged on the news of the bid with a 27% gain on Monday December 18th before closing at $2.16 a share.
The Trust Bank’s attempt to acquire Link follows abandoned bids from previous suitors like Dye and Durham, SS&C, Pacific Equity Partners, and The Carlyle Group. These bids highlight Link’s strong fundamentals, underpinned by its narrow economic moat, capital-light business model, highly recurring fees, and a resilient balance sheet that supports stable dividends.
We lift our fair value estimate to $2.10 per share from $1.50. We ascribe a 75% probability of the transaction proceeding to completion at the proposed $2.26 consideration, and a 25% chance the scheme does not proceed and Link’s fair value estimate reverts to our stand-alone valuation of $1.50.
Link’s board of directors, which owns around 1% of Link, unanimously recommends the deal. The Trust Bank’s offer came at a more opportune time compared with previous bids, and we think it is likely that it will press on for a deal’s completion rather than pull out like prior suitors.
There is now less business uncertainty that can discourage buyers, following Link’s divestment of noncore businesses, and greater clarity on redress payment liabilities, notably related to Link Fund Solutions’ regulatory issues. Also, Australia’s competition regulator has previously greenlighted the acquisition of Link by a foreign buyer, Dye and Durham, which might set a precedent for this acquisition.
The proposed scheme likely provides investors with an opportunity to sell at a good price, considering headwinds to account fees from competitive pressures.
