Link Group has received a conditional, non-binding indicative proposal from investment fund Carlyle Asia Partners V, an entity of investment firm Carlyle Group to acquire 100% of the shares in Link Group at $5.38 per share.
In an announcement to the Australian Securities Exchange (ASX), Link Group said the $2.81 billion proposal was subject to a number of conditions, including due diligence, the negotiation and execution of transaction documentation; and the securing debt financing.
“Link Group understands the proposal would also require: final investment committee approval from the relevant Carlyle committees; certain regulatory and other approvals,” it said.
The Link Group board would consider the proposal, including obtaining advice from its financial, legal and tax advisers. Link Group has appointed Macquarie Capital and UBS as its financial advisers and Herbert Smith Freehills as its legal adviser.”
Carlyle Group offered $3 per share in cash for the primary business and a pro-rata distribution of Link Group’s shareholding in PEXA Group Limited to Link’s shareholders, valued on a “lookthrough basis” at $2.38 per share. The would mean the proposal values Link Group share at $5.38, representing a 24.2% premium to last close.
In October 2020, Carlyle Group and Pacific Equity Partners offered to purchase Link Group at $5.20 a share and in December 2020, SS&C Technology Holdings made an indicative offer to buy the market services business at $5.65 per share. Both offers were rejected.
Earlier this week, Carlyle Group acquired a majority stake in CSS AG, a German business software provider with a focus on accounting and human resources.
Link had fallen 20% since the start of the year and had an all-time high near $9.
VanEck deputy head of investments and capital markets, Jamie Hannah, said it was a good deal for shareholders in the short term but the question arose whether it was in their best interest in the short to long term.
"As a shareholder in Link, we would suggest the board review the offer, but remain focused on its expected growth targets. Link enjoys a reasonably strong balance sheet and many brokers have a buy on the stock, so there’s an expectation of future price gains," said Hannah.
"But at the same time, Link posted losses in 2021 and 2020, the company's revenues have been falling over the past few years, and its return on equity has been negative.
Link has struggled to grow its share price, and some shareholders are sitting on a loss."
Link Group suspended its on-market share buyback, following the release of the latest Carlyle Group proposal.
Up until today, Link Group had bought back over 23 million shares for over $100 million out of a total buyback size of up to $150 million.
“Shareholders do not need to take any action in relation to the proposal. It should be noted that there is no certainty that the proposal will result in any transaction,” it said.