The $2.5 billion bid for Link Administration Holdings
(ASX:LNK) from Canadian group Dye and Durham is in danger of collapse after a sensational statement in the UK on Monday from a key regulator.
Link had its shares halted before trading started on the ASX on Monday, “pending an announcement by the Company in relation to an update on the regulatory approvals which are Conditions Precedent to the scheme of arrangement with Dye & Durham Corporation.”
That mystery statement was quickly fleshed out by traders as something brewing in the UK approval process, with a statement expected soon from the Financial Conduct Authority.
Overnight the Financial Conduct Authority revealed some details of the results of its investigation into the collapse of the fund run by former star UK fund manager, Neil Woodford, saying it is “likely” to demand that Link Group pay more than £300 million over its role in the scandal.
The UK financial regulator has been investigating the demise of the former star stockpicker’s flagship fund. Link, which was the fund’s administrator, froze the fund in June 2019, trapping £3.7bn of investors’ funds.”
“The FCA has investigated the circumstances leading to the suspension of the [Woodford Fund] and is likely to seek to require [Link] to pay a financial penalty and/or consumer redress,” the regulator said in its statement late on Monday, adding that it may require Link to pay up to £306 million.” (that’s more than half a billion Australian dollars).
The regulator said it had issued the statement after “announcements made on Monday 12 September by Link Group to the Australian Securities Exchange and Dye and Durham (D&D) to the Toronto Stock Exchange.”
Financial Conduct Authority said it was providing a short update on its involvement in the proposed takeover of the Link Group by D&D.
“The proposed takeover involves the acquisition of seven firms authorised by the FCA. D&D is required to seek FCA approval to take control of these firms. One of these is Link Fund Solutions Ltd (LFS), which managed the LF Woodford Equity Income Fund (WEIF).
“The FCA has therefore decided to approve D&D’s acquisition of LFS, subject to a condition to commit to make funds available to meet any shortfall within LFS in the amount available to cover any redress payments LFS may be required to make.
“This is the only condition the FCA has decided to impose to allow D&D to take control of the seven UK-authorised firms. The FCA has approved a change in control for the other six UK-regulated entities owned by Link Group.
“Given the FCA’s enforcement case with LFS is ongoing, the FCA is not currently able to provide any further information. The FCA understands that investors will be keen to understand the impact that this may have on them, including any potential to receive redress, and will provide an update as soon as it is able to do so.”
So in effect, if Link and Dye and Durham want to complete the deal it will cost a further half a billion dollars or more, one way or another. That will come from cutting
the offer price to less than $A2 billion – but given that the investigation’s eventual outcome remains unknown, the eventual cost could be open ended and that is likely to kill the offer.
Link also faces a class action in the UK, which has held the greatest fear for Australian investors – up till now.
